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1、精选优质文档-倾情为你奉上Outline for Reviewing International Finance (2013)The Structure of Examination Paper1. Multiple Choice (301, 30 points)2. Definition of Terms(54, 20 points)3. Short Answer (310, 30 points)4. Calculation (210, 20 points)Outline for ReviewingMultiple ChoiceCover all ChaptersDefinition of

2、TermChapter 12: balance of payments accounting, current account balance，official settlements balance，national savingbalance of payments accounting: 国际收支会计 accounting record of all monetary transactions between a country and the rest of the worldCurrent account balance (exports minus imports): 经常项目差额

3、net expenditure by foreigners on domestic goods and services.The official settlements balance :官方结算差额 is the negative value of official international reserve assets, and it shows a central banks holdings of foreign assets relative to foreign central banks holdings of domestic assets.The bookkeeping

4、offset to the balance of official reserve transaction .National saving = national income (Y) that is not spent on consumption (C) or government purchases (G).Chapter 13: appreciation, exchange rate, real rate of return, forward exchange rate, spot exchange rate, interest parity condition, vehicle cu

5、rrencyAppreciation is an increase in the value of a currency relative to another currency. Exchange rate: The price of one currency in terms of another is called an exchange rate.The real rate of return : The expected rate of return that savers consider in deciding which assets to hold is the expect

6、ed real rate of return, that is, the rate of return computed by measuring asset values in terms of some broad representative of products that savers regularly purchase.forward exchange rates: Foreign exchange deals sometimes specify a value date farther away than two days30 days, 90 days, 180 days,

7、or even several years. The exchange rates quoted in such trans-actions are called forward exchange rates.The foreign exchange transactions we have been discussing take place on the spot: two par-ties agree to an exchange of bank deposits and execute the deal immediately. Exchange rates governing suc

8、h on-the-spot trading are called spot exchange rates, and the deal is called a spot transaction.Interest parity condition: Interest parity implies that deposits in all currencies are equally desirable assets.Interest parity implies that arbitrage in the foreign exchange market is not possible.vehicl

9、e currency: 周转货币 Because of its pivotal role in so many foreign exchange deals, the dollar is sometimes called a vehicle currencyChapter 14: aggregate money demand, money supply, exchange rate overshooting,Aggregate money demand:货币总和需求 aggregate money demand is the total demand for money by all hous

10、eholds and firms in the economy.is just the sum of all the economys individual money demands.Money supply: the total stock of money in the economy; currency held by the public plus money in accounts in banks Exchange rate overshooting: the exchange rate is said to overshoot when its immediate respon

11、se to a disturbance is greater than its long-run response.Chapter 15: Fisher effect, law of one price, nominal interest rate, purchasing power parity (PPP), real exchange rate, relative PPPFisher effect: describes the relationship between nominal interest rates and inflation.Law of one price: the lo

12、w of one price states that in competitive markets free of transportation costs and official barriers to trade(such as tariffs),identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency.Nominal interest rate: 名义利率 An interes

13、t rate is called nominal if the frequency of compounding (e.g. a month) is not identical to the basic time unit (normally a year).Purchasing power parity(PPP): the theory of purchasing power parity states that the exchange rate between two countries currencies equals the ratio of the countries price

14、 levels.Real exchange rate: the rate of exchange for goods and services across countriesRelative PPP: states that the percentage change in the exchange rate between two currencies over any period equals the difference between the percentage changes in national price levels.Chapter 16: AA schedule, i

15、nflation bias, aggregate demand, J-curve, DD schedule, pass-throughAA schedule: The schedule of exchange rate and output combinations that are consistent with equilibrium in the domestic money market and the foreign exchange market is called the AA schedule.inflation bias: Refers to the difference b

16、etween the mean value and the target value of inflation according to the circulation by the basic model.DD schedule: The curve shows all combinations of output and the exchange rate for which the output market is in short run equilibrium.pass-through: The percentage from the exchange rate to import

17、prices by which import prices rise when the home currency depreciates by 1 percent.Chapter 17: balance of payments crisis, bimetallic standard, capital flight, devaluation, gold exchange standard, gold standard, imperfect asset substitutability, managed floating exchange rates, perfect asset substit

18、utability, reserve currency, revaluation, risk premium, self-fulfilling currency crises, sterilized foreign exchange intervention,balance of payments crisis: When a central bank does not have enough official international reserve assets to maintain a fixed exchange rate, a balance of payments crisis

19、 results.bimetallic standard: the value of currency is based on both silver and gold.capital flight: financial capital is quickly moved from domestic assets to foreign assetsdevaluation: a devaluation occurs when the central bank raises the domestic currency price of foreign currencygold exchange st

20、andard: halfway between the gold standard and a pure reserve currency standard is the gold exchange standardgold standard: gold acts as official international reserves that all countries use to make official international payments.imperfect asset substitutability: In general, foreign and domestic as

21、sets may differ in the amount of risk that they carry: they may be imperfect substitutes.managed floating exchange rates: system in which governments may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed .perfect asset substitutability: the key feature of our m

22、odel that leads to these results is the assumption that the foreign exchange market is in equilibrium only when the expected returns on domestic and foreign currency bonds are the same.reserve currency: one currency acts as official international reserves.Revaluation: a revaluation occurs when the c

23、entral bank lower the domestic currency price of foreign currencyrisk premium: default risk and exchange rate riskself-fulfilling currency crises: Expectations of a balance of payments crisis only worsen the crisis and hasten devaluation that occur in such circumstances often are called self-fulfill

24、ing currency crises .sterilized foreign exchange intervention: central banks sometimes carry our equal foreign and domestic asset transactions in opposite directions to nullify the impact of their foreign exchange operations on the domestic money supply . this type of policy is called sterilized for

25、eign exchange interventionChapter 18: external balance, internal balance, expenditure-changing policy, price-specie-flow mechanism, expenditure-switching policyexternal balance: A countrys current account is neither so deeply in deficit that the country may be unable to repay its foreign debts in th

26、e future nor so strongly in surplus that foreigners are put in that position.Internal balance: The full employment of a countrys resources and domestic price level stability.expenditure-changing policy: Changing social needs or total expenditure level of the national economy policy, whose purpose is

27、 to change aggregate demand to change the demand for foreign goods, services and financial assets, and achieve the balance of payments adjustment. price-specie-flow mechanism: Under the internationally common practice of the gold standard, a countrys international balance of payments can keep equili

28、brium automatically by the fluctuations of commodity price and the output or input of gold.expenditure-switching policy: The policies which can affect the international competitiveness of commodities and to increase their income relative to spending by changing the spending structure.Chapter 19:dest

29、abilizing speculationdestabilizing speculation： it means that if foreign exchange traders saw that a currency was depreciating, it was argued, they might sell the currency in the expectation of future depreciation regardless of the currency s longer-term prospects; and as more traders jumped on the

30、bandwagon by selling the currency, the expectations of depreciation would be realized.Chapter 20:monetary efficiency gain, economic stability loss, optimum currency areasmonetary efficiency gain： the monetary efficiency gain from joining the fixed exchange rate system equals the joiners saving from

31、avoiding the uncertainty, confusion, and calculation and transaction costs that arise when exchange rates float.economic stability loss： the extra instability caused by the fixed exchange rate is the economic stability loss fixed exchange rates are most appropriate for areas closely integrated throu

32、gh international trade and factor movements.Short AnswerChapter 131.The Effect of Changing Interest Rates on the Current Exchange RateAn increase in the interest paid on deposit of a currency causes that currency to appreciate against foreign currencies.A rise in dollar interest rates causes the dol

33、lar to appreciate against the euro.A rise in euro interest rates causes the dollar to depreciate against the euro.2.The Effect of Changing Expectations on the Current Exchange RateA rise in the expected future exchange rate causes a rise in the current exchange rate ,similarly ,a fall in the expecte

34、d future exchange rate causes a fall in the current exchange rate .Chapter 141. the Money Supply and the Exchange Rate in the Short Runin the short run ,the price level and real output are given .理解上面这个图是什么意思就OK。再分析M变化时Exchange Rate怎么变化。2. Permanent Money Supply Changes and the Exchange Rate.中文版教材35

35、7面，英文版教材87面，看懂并能描绘清楚（a）和（b）两幅图。Chapter 151.The Relationship Between PPP and the Law of One Pricea) The law of one price applies to individual commodities, while PPP applies to the general price level.b) If the law of one price holds true for every commodity, PPP must hold automatically for the same

36、reference baskets across countries.Proponents of the PPP theory argue that its validity does not require the law of one price to hold exactly。2.The Fundamental Equation of the Monetary Approach predicts that levels of average prices across countries adjust so that the quantity of real monetary asset

37、s supplied will equal the quantity of real monetary assets demanded: PUS = MsUS/L (R$, YUS) PEU = MsEU/L (R, YEU) 3 、Explaining the Problems with PPPThe failure of the empirical evidence to support the PPP and the law of one price is related to:1)Trade barriers and nontradables 2)Departures from fre

38、e competition3)Differences in measures of average prices for baskets of goods and servicesChapter 161.Tmporary Changes in Monetary and Fiscal PolicyTwo types of government policy:a) Monetary policyi. It works through changes in the money supply.b) Fiscal policyi. It works through changes in governme

39、nt spending or taxes.Temporary policy shifts are those that the public expects to be reversed in the near future and do not affect the long-run expected exchange rate.Assume that policy shifts do not influence the foreign interest rate and the foreign price level.Monetary PolicyAn increase in money

40、supply (i.e., expansionary monetary policy) raises the economys output.-The increase in money supply creates an excess supply of money, which lowers the home interest rate.-As a result, the domestic currency must depreciate (i.e., home products become cheaper relative to foreign products) and aggreg

41、ate demand increases.Figure 16-10: Effects of a Temporary Increase in the Money Supply Fiscal PolicyAn increase in government spending, a cut in taxes, or some combination of the two (i.e, expansionary fiscal policy) raises output. The increase in output raises the transactions demand for real money

42、 holdings, which in turn increases the home interest rate. As a result, the domestic currency must appreciate. Policies to Maintain Full EmploymentTemporary disturbances that lead to recession can be offset through expansionary monetary or fiscal policies.Temporary disturbances that lead to over emp

43、loyment can be offset through contractionary monetary or fiscal policies.2. Permanent Shifts in Monetary and Fiscal Policy A permanent policy shift affects not only the current value of the governments policy instrument but also the long-run exchange rate.This affects expectations about future excha

44、nge rates.-A Permanent Increase in the Money SupplyA permanent increase in the money supply causes the expected future exchange rate to rise proportionally.As a result, the upward shift in the AA schedule is greater than that caused by an equal, but transitory, increase (compare point 2 with point 3

45、 in Figure 16-14). Adjustment to a Permanent Increase in the Money SupplyThe permanent increase in the money supply raises output above its full-employment level.As a result, the price level increases to bring the economy back to full employment.Figure 16-15 shows the adjustment back to full employm

46、ent.-A Permanent Fiscal ExpansionA permanent fiscal expansion changes the long-run expected exchange rate.If the economy starts at long-run equilibrium, a permanent change in fiscal policy has no effect on output.It causes an immediate and permanent exchange rate jump that offsets exactly the fiscal

47、 policys direct effect on aggregate demand.A temporary increase in the money supply causes a depreciation of the currency and a rise in output.Permanent shifts in the money supply cause sharper exchange rate movements and therefore have stronger short-run effects on output than transitory shiftsChap

48、ter 171.Stabilization Policies with a Fixed Exchange Ratel Monetary PolicyUnder a fixed exchange rate, central bank monetary policy tools are powerless to affect the economys money supply or its output.l Fiscal Policy-The rise in output due to expansionary fiscal policy raises money demand.（由财政扩张引起的

49、产出增加增加货币需求）-To prevent an increase in the home interest rate and an appreciation of the currency, the central bank must buy foreign assets with money, thereby increasing the money supply).l Changes in the Exchange Rate1. Devaluation（币值下调）a) It occurs when the central bank raises the domestic currenc

50、y price of foreign currency, E.b) It causes:A rise in output. A rise in official reserves. An expansion of the money supplyc) It is chosen by governments to:Fight domestic unemployment.Improve the current account .Affect the central banks foreign reserves2. Revaluation（币值上调）It occurs when the centra

51、l bank lowers E.3. In order to devalue or revalue, the central bank has to announce its willingness to trade domestic against foreign currency, in unlimited amounts, at the new exchange rate.l Adjustment to Fiscal Policy and Exchange Rate Changes1. Fiscal expansion causes P to rise.（财政扩张引起价格上涨）1) Th

52、ere is no real appreciation in the short-run2) There is real appreciation in the long-run2. Devaluation is neutral in the long-run. （本币贬值长期效用为中性）2、 Benefits and Drawbacks of the Gold StandardBenefits:1) It avoids the asymmetry inherent in a reserve currency standard.2) It places constraints on the g

53、rowth of countries money supplies.Drawbacks:1) It places undesirable constraints on the use of monetary policy to fight unemployment.2) It ensures a stable overall price level only if the relative price of gold and other goods and services is stable.3) It makes central banks compete for reserves and

54、 bring about world unemployment.4) It could give gold producing countries (like Russia and South Africa) too much power.Chapter 181.Mcroeconomic Policy Goals in an Open EconomyIn open economies, policymakers are motivated by two goals:1) Internal balance: Full employment and Price level stability.a)

55、 Under and over employment lead to price level movements that reduce the economys efficiency.b) To avoid price-level instability, the government must:Prevent substantial movements in aggregate demand relative to its full-employment level. Ensure that the domestic money supply does not grow too quick

56、ly or too slowly.2) External balance: The optimal level(最优水平) of the current account(A current account level that is neither so deeply in deficit that the country may be unable to repay its debts nor so strongly in surplus that foreigners are put in that position）Problems with Excessive Current Acco

57、unt Deficits:They sometimes represent temporarily high consumption resulting from misguided government policies.They can undermine foreign investors confidence and contribute to a lending crisis. Problems with Excessive Current Account Surpluses:- They imply lower investment in domestic plant and eq

58、uipment.-They can create potential problems for creditors(债权人) to collect their money.-They may be inconvenient for political reasons.-Several factors might lead policymakers to prefer that domestic saving be devoted to higher levels of domestic investment and lower levels of foreign investment: It

59、may be easier to tax It may reduce domestic unemployment. It can have beneficial technological spillover effects2.Analyzing Policy Options under the Bretton Woods System Assume that: R = R* Chapter 191.The Case for Floating Exchange Ratesa. Monetary Policy AutonomyFloating exchange rates can restore

60、 monetary control to central banks and allow each country to choose its own desired long-run inflation rate.b. SymmetryFloating exchange rates remove two main asymmetries of the Bretton Woods system and allow central banks abroad to be able to determine their own domestic money supplies and the U.S.

61、 to have the same opportunity as other countries to influence its exchange rate against foreign currencies.c. Exchange Rates as Automatic StabilizersFloating exchange rates quickly eliminate the “fundamental disequilibriums” that had led to parity changes and speculative attacks under fixed rates.2、

62、 The Case Against Floating Exchange Ratesa. DisciplineFloating exchange rates do not provide discipline for central banks.Central banks might embark on inflationary policies (e.g., the German hyperinflation of the 1920s).The pro-floaters response was that a floating exchange rate would bottle up inf

63、lationary disturbances within the country whose government was misbehaving.b. Destabilizing Speculation and Money Market DisturbancesFloating exchange rates allow destabilizing speculation.Countries can be caught in a “vicious circle” of depreciation and inflation.Advocates of floating rates point o

64、ut that destabilizing speculators ultimately lose money.Floating exchange rates make a country more vulnerable to money market disturbances.c. Injury to International Trade and InvestmentFloating rates hurt international trade and investment because they make relative international prices more unpredictable. Exporters and importers face greater exchange risk.International investments face greater uncertainty about their payoffs.Supporters of floating ex