Daniels and VanHoose International Monetary and Financial Economics, 2ed. - PowerPoint PPT Presentation

About This Presentation

Daniels and VanHoose International Monetary and Financial Economics, 2ed.


There are over twenty five files to accompany the text. ... leaders of the G7 nations agreed upon the HIPC (Heavily Indebted Poor Countries) ... – PowerPoint PPT presentation

Number of Views:76
Avg rating:3.0/5.0
Slides: 44
Provided by: marque91


Transcript and Presenter's Notes

Title: Daniels and VanHoose International Monetary and Financial Economics, 2ed.

Daniels and VanHooseInternational Monetary and
Financial Economics, 2ed.
  • Using the Power Point Files

Power Point Files
  • There are over twenty five files to accompany the
  • Each filename consists of a number followed by a
    keyword. For example, 03debtrelief.
  • The sequence corresponds to the text.

PowerPoint Slides
  • In addition to the PowerPoint slides, there are
    several pdf files from original sources in the
    public domain. Some were created by the authors.
  • The pdf files should be kept in the same
    directory as the PowerPoint files.

  • Any word or words that appear in red contain a
    hypertext link.
  • Clicking on the red link will take you to a pdf
    file or a website.
  • It is important, therefore, that your machine
    have Adobe Reader installed.

  • These files also contain currency symbols.
  • An older version of PowerPoint may not have the
    euro symbol.
  • To check if your machine has the symbol
    installed, does the symbol appear here ?
  • If not, you can download the symbol upgrade from
    Microsoft. Just search for euro.

  • To print the slides, click on file and then
  • In the bottom left-hand-side of the print window
    select pure black and white.
  • For taking classroom notes, select Handouts (3
    slides per page) in the print what section of
    the print window.

  • It may also be helpful to remove the background
    graphics before printing.
  • To do this, right click on the slide.
  • Click on Background.
  • Check the box Omit background graphics from
  • Click on Apply to All.

  • The Global Economy

The Backlash Against Globalization
  • Genoa, Italy, 2001, Protests against
    globalization Target G8 Leaders
  • Jubilee 2000, a World-Wide Movement to Cancel
    the Crushing Debt of Impoverished Nations.
    Target G8 Leaders
  • Seattle, Washington. Target WTO
  • Washington, D.C. Target IMF, and World Bank

What is Globalization?(from Held, et al., 1999)
  • Peoples everywhere are increasingly subject to
    the disciplines of the global marketplace.
  • A myth which conceals the reality of an
    international economy increasingly segmented into
    three major regional blocs in which national
    governments remain very powerful.
  • States and societies across the globe
    experiencing a process of profound changes as
    they adapt to a more interconnected, but highly
    uncertain world.

Generalization(from Held, et al., 1999)
  • The widening, deepening and speeding up of
    worldwide interconnectedness in all aspects of
    contemporary social life, from the cultural to
    the criminal, the financial to the spiritual.

Our Focus
  • We shall focus on the institutions and markets
    that connect nations economies.
  • More specifically, we shall concentrate on
    financial sector linkages.

Real and Financial Sectors
  • Real Sector Production and sale of goods and
  • Financial Sector Transactions in financial

International Economic Integration
  • International economic integration refers to the
    extent and strength of real- sector and
    financial-sector linkages among national
    economies. Real-sector linkages occur through
    the international transactions in goods and
    services while the financial-sector linkages
    occur through international transactions in
    financial assets.

Growth of World Exports
Growth of Trade and Foreign Exchange Transactions
Stylized Facts
  • Unprecedented growth of FDI in the United States.
  • Unprecedented growth of MA activity.
  • Extreme variability of the currency values of
    large developing and emerging economies.
  • Development of the financial and monetary systems
    of Central and eastern Europe, and of China.
  • Sharp financial and economic crises.
  • The worlds poorest economies mired in debt
    crises and economic stagnation.

Capital Flows to Emerging Economies
The Balance of Payments Accounting System
  • International Bookkeeping

Balance of Payments
  • System of accounts which is a subset of the
    National Income and Production Accounts
  • A double-entry bookkeeping system.
  • Debit Entries Transactions that generate a
    payment outflow (e.g., import).
  • Credit Entries Transactions that generate a
    payment inflow (e.g., export).

Balance of Payments
  • The current account is the broadest measure of a
    nations real sector trade.
  • Includes
  • Goods
  • Services
  • Income Receipts and Payments
  • Unilateral Transfers

Balance of Payments
  • Goods Exports and imports of tangible items.
  • Services Exports and imports of services, for
  • Typical business services such as banking and
    financial services, insurance, and consulting.
  • Tourism

Balance of Payments
  • Income Receipts Includes items such as
  • Investment income on US-owned assets abroad.
  • Receipts of income on US direct investment
  • Government income receipts

Balance of Payments
  • Income Payments Includes items such as
  • Investment income on foreign-owned assets in the
    United States.
  • Payments of income on foreign direct investment
    in the United States
  • US Government income payments

Balance of Payments
  • Unilateral Transfers Includes items such as
  • Government grants abroad
  • Private remittances
  • Private grants abroad

Balance of Payments (2000)
Balance of PaymentsThe Financial Sector
  • In June 1999, US capital account definitions were
    modified to bring them more in line with
    definitions recommended by the International
    Monetary Fund.
  • Now there are two accounts The Capital Accounts
    and Financial Accounts.

Balance of PaymentsThe Financial Sector
  • The new Capital Account includes items that were
    previously included in unilateral transfers, such
  • Debt forgiveness
  • Migrants transfers (as they leave the country).
  • The new capital account is small for the US (lt
    0.1 percent of capital flows), but expected to

Balance of PaymentsThe Financial Sector
  • The Financial Account
  • Records international transactions in the
    financial sector
  • Includes portfolio and foreign direct investment
  • Includes changes in banks and brokers cash
    deposits that arise from international

Balance of PaymentsThe Financial Sector
  • US-Owned Assets Abroad Increase or decrease in
    US ownership of foreign financial assets.
  • Foreign-Owned Assets in the US Increase or
    decrease in foreign ownership of domestic assets.
  • Reserve Assets Primarily the assets of central

Balance of PaymentsThe Financial Sector
  • Portfolio Investment Individual or business
    purchase of stocks, bond, or other financial
    assets or deposits. (An income strategy)
  • Foreign Direct Investment Purchase of financial
    assets that results in a 10 percent or greater
    ownership share. (A financial control strategy)

Capital and Financial Account (2000)
The Balance of PaymentsThe Statistical
International Debt
  • Debt Relief for the Poorest Nations?

Debtor / Creditor Status
  • Net Debtor Nation
  • A nation whose total claims abroad are less than
    the total foreign claims on the nation.
  • Net Creditor Nation
  • A nation whose stock of foreign financial assets
    is greater than the stock of foreign-held
    domestic financial assets.

The US and Net Debtor Status
  • It is neither necessarily good nor bad to be a
    net debtor.
  • The US is the worlds largest net debtor,
    primarily because of record FDI inflows.
  • The US has been a net debtor in the past, and it
    spurred an industrial revolution.

Debt Relief
  • Debt relief for the poorest nations is one of the
    most pressing international economic policy
    issues today.
  • Beginning in the early 1980s, the stock of
    international debt became so large that many
    developing nations could no longer make all of
    their debt service payments.

Debt Relief / Institutions
  • Paris Club
  • Forum for multilateral negotiations between
    debtor and creditor nations.
  • London Club
  • Forum for negotiations on private debt owed to
    commercial banks.
  • Millennium Fund
  • Private sector donations for debt relief

Debt Relief
  • Despite the efforts undertaken in these
    organizations, during the 1990s, the debt stock
    of the poorest nations doubled in 5 years.
  • At the start of 2000, less than half of the debt
    obligations were being fulfilled, with US60
    billion in arrears.

Debt Relief
  • In 1996, the leaders of the G7 nations agreed
    upon the HIPC (Heavily Indebted Poor Countries)
    Initiative, intended as a means to qualify
    nations (originally 26) and deliver debt relief.
  • The HIPC initiative failed to deliver relief
    after 3 years, as only seven nations qualified
    and none saw any debt relief.

Debt Relief
  • In 1999, public pressure lead to the Cologne Debt
    Initiative (CDI). The CDI was intended to
    deliver faster and deeper relief.
  • Expanded list of countries.

  • 15 percent of debt stock owned by nations not
    part of the CDI negotiations.
  • 50 percent of the debt stock not being serviced
    as is. Hence, forgiveness of stock may not help
    that much.
  • Public financing issues.

Current Status
  • For current information on HIPC, visit the web
    sites of the International Monetary Fund and the
    World Bank.
Write a Comment
User Comments (0)
About PowerShow.com