P. 1
INTL303chpt2BOP~IMF~worldbank

INTL303chpt2BOP~IMF~worldbank

|Views: 0|Likes:
Published by Hakim Jan

More info:

Published by: Hakim Jan on Oct 21, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PPT, PDF, TXT or read online from Scribd
See more
See less

03/08/2015

pdf

text

original

Slide 1

Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson

Slide 2

Chapter 2

Balance of Payments
The Current Account The Capital Account

page 39

Exchange Rate IMF and the World Bank

Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson

with additions and enhancements by Tim Richardson .Slide 3 ³A measurement of all transactions between domestic and foreign residents over a period of time´ Madura page 39 Slides developed by Jeff Madura.

with additions and enhancements by Tim Richardson .Slide 4 Balance of Payments Measure of all transactions between domestic and foreign residents  Current account ± balance of goods and services net trade + interest and dividend payments ± unilateral transfers imports exports Slides developed by Jeff Madura.

like a ³national´ chequing account balance book Slides developed by Jeff Madura. with additions and enhancements by Tim Richardson .Slide 5 BOP accounts provide a system for documenting economic transactions during a given period between 2 countries A BOP statement documents a country¶s past economic transactions with other countries ‡ .

with additions and enhancements by Tim Richardson . which show either surplus or deficit 2. The statement is made up of balances. The total statement must be a balance Slides developed by Jeff Madura.Slide 6 2 basic concepts 1.

changes in response to the surpluses or deficits in the Current and Capital Account page 85 & 86 in text Slides developed by Jeff Madura. The Capital Account .Slide 7 Statements are in 4 major Sections  1. The Current Account .imports and exports of goods and services  2. Errors and Omissions  4.investments and loans  3. with additions and enhancements by Tim Richardson . The Official Reserve Account .

Slide 8 Explanation of Balances 5 categories 1.changes in response to the surpluses or deficits in the Current and Capital Account Slides developed by Jeff Madura. The Official Settlements Account . Balance of Goods and Services 3. Basic Balance .imports and exports of JUST goods 2.goods & services + short term capital transfers 4. Current Account . with additions and enhancements by Tim Richardson .goods & services + long term capital transfers 5. Balance of Trade .

with additions and enhancements by Tim Richardson .Slide 9 Careful analysis of a Country¶s BOP statements should be made before considering doing business in the country. This information can help you evaluate risk. Slides developed by Jeff Madura.

with additions and enhancements by Tim Richardson .Slide 10 Balance of Payments Trends in Trade  NAFTA: ± free trade block of US. Canada and Mexico  European trade ± Single European Act increased intra-european trade intra- ± eastern european trade changes importing larger amounts of goods and services  Trade agreements around the world Slides developed by Jeff Madura.

Slide 11 Balance of Payments Trends in Trade  GATT trade agreement ± 117 countries agreed to lower tariffs ± trade barriers slowly eliminated until year 2000  European capital flow ± much capital shifting to eastern Europe ± German reunification redirection of funds increased US interest rates Slides developed by Jeff Madura. with additions and enhancements by Tim Richardson .

Slide 12 Factors affecting Current Account  1. Inflation ± higher rates relative to other countries affects trade increased imports and decreased exports  2. with additions and enhancements by Tim Richardson . National income current account decreases (increases) greater wealth implies greater need for foreign goods ± increases (decreases) relative to other countries Slides developed by Jeff Madura.

China: $14. Europe: $2. with additions and enhancements by Tim Richardson .Slide 13 Factors affecting Current Account  3.1235.93. Government restrictions increases prices & lowers demand on imported goods increases current account of the country US tariffs on apparel and farm products tariffs imposed in different countries on a case of imported beer: ± US: $0.64 ± tariff (tax on imported goods) Slides developed by Jeff Madura.

with additions and enhancements by Tim Richardson . Exchange rates ± a currency valued in terms of another currency ± increase in exchange rate suggests decrease in current account exported goods would cost more.Slide 14 Factors affecting Current Account  4. thus decreasing demand for the good assumes price-elastic goods (sensitive to price pricechanges) Slides developed by Jeff Madura.

and not backed by gold In 1976 the world changed to a Floating Exchange Rate System Slides developed by Jeff Madura. This was the Fixed Exchange Rate System Problems developed when money was printed. with additions and enhancements by Tim Richardson .Slide 15 History Currency value used to be based on stock of gold the government held in central bank.

with additions and enhancements by Tim Richardson 6 HK$ to 1 US$ . Hong Kong dollar used to be ³pegged´ at Slides developed by Jeff Madura. free floating  small economies tie their rate to major trading partners  ie. not exactly rates. and the supply on the international 4X markets clean float .Slide 16 Floating Exchange Rate System  this system determines the value of a currency according to the demand for it.government intervention  current system is managed rates.no government intervention dirty float .

org/external/np/exr/facts/glance. with additions and enhancements by Tim Richardson .imf.Slide 17 181 countries .htm difficulties Slides developed by Jeff Madura.promotes int¶l monetary cooperation MAIN PURPOSES  facilitate the expansion and balanced growth of int¶l trade  promote currency exchange stability  establishment of multilateral system of payments  help countries with temporary balance of payments http://www.

imf. http://www. with additions and enhancements by Tim Richardson .BUT.org/external/np/exr/facts/glance. only on the condition that they undertake economic reforms to eliminate these difficulties for their own good.Slide 18 181 countries .promotes int¶l monetary cooperation MAIN ACTIVITY  Lends money to members who have trouble meeting financial obligations .htm Slides developed by Jeff Madura.

with additions and enhancements by Tim Richardson .promotes int¶l monetary cooperation Key Duties  CFF .Compensatory Financing Facility  purpose is to reduce the impact of export instability on country economies Slides developed by Jeff Madura.Slide 19 181 countries .

Slide 20 Areas of Activity  Surveillance It appraises its members exchange rate policies Analyses their general economic situation  Financial assistance to IMF member countries  Technical assistance re: fiscal and monetary policy http://www.htm Slides developed by Jeff Madura.imf. with additions and enhancements by Tim Richardson .org/external/np/exr/facts/glance.

Slide 21 ORIGINS: Official name: International Bank for Reconstruction and Development Founded to help reconstruct European Countries after WW II http://www. with additions and enhancements by Tim Richardson .worldbank.org Slides developed by Jeff Madura.

with additions and enhancements by Tim Richardson for a highway through Brazilian jungle. . Made environmental mistakes ie.Slide 22 Activities: Today it is involved in development aid for poor countries Lends money for long-term development longprojects. Gave money Slides developed by Jeff Madura. Works with the IMF to resolve debt problems in the Developing World Has made mistakes in giving money to corrupt regimes.

Slides developed by Jeff Madura. with additions and enhancements by Tim Richardson .Slide 23 Activities: In situations where war has ended. the World Bank acts to facilitate the transition to sustainable peace after hostilities cease and to support economic and social development.

plants.Direct Investment mfg. with additions and enhancements by Tim Richardson . warehouses.Slide 24 World Investment Flows . processing operations.Portfolio Investment stocks. bonds. T-bills T- . securities. representative offices Slides developed by Jeff Madura.

Why FDI Exits  Land. with additions and enhancements by Tim Richardson . they have to go there eg. Resources and Slide 25 some types of business cannot be relocated  If a company wants access. you may follow to continue to be able to supply eg. forest harvesting  If your customer moves overseas. Autoparts companies Slides developed by Jeff Madura. Mining operations.

or to a 3rd market eg.Why FDI Exits  Some Slide 26 companies set up operations overseas because manufacturing locally is cheaper than exporting and paying the shipping costs  Companies also setup mfg. Japanese companies mfg. and export to the USA Slides developed by Jeff Madura. Overseas in low-wage lowareas to make products that are then sent back to customers in the Home Country. Electronic goods in Malaysia. with additions and enhancements by Tim Richardson .

with additions and enhancements by Tim Richardson  Jobs .Slide 27 Concerns of the Host Country for citizens  Additional taxes  Technology  Attraction to other types of companies  loss of economic control  vulnerability to employment crisis if co. leaves Slides developed by Jeff Madura.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->