griffin ib7 inppt_07
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Griffin ib7 inppt_07TRANSCRIPT
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Chapter 7
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 1
International Monetary System and the Balance
of Payments
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Learning Objectives
• Study the international monetary system
in international trade and investment
• Explain the evolution and functioning of
the gold standard
• Summarize the role of the World Bank
Group and the IMF in the post—WWII
international monetary system set up at
Breton Woods
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Learning Objectives
• Explore how the flexible exchange rate
system evolved
• Describe the function and structure of
the balance of payments accounting
system
• Differentiate among the definitions of a
balance of payments surplus and deficit
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 3
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History of the International Monetary System
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Functions of the IMS
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Value and Exchange Currency
Balance of Payments
System
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Summary of Discussion
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Evolution and Functioning of the Gold Standard
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The Gold Standard
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Fixed Exchange
Rate System
Sterling-Based Gold Standard
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Collapse of Gold Standard
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•World War I
•Great Depression
•World War II
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Summary of Discussion
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Role of the World Bank and the IMF in Post-WWII
International Monetary System
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Bretton Woods Era
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Representatives of 44
Countries Met in 1945
Avoid Conditions
That Caused WWII
Promote Global
Peace and Prosperity
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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 -
The International Bank for Reconstruction and Development
13
Reconstruct
Europe
Assist
Developing
Countries
Official Name of the World Bank
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The World Bank Group
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International Bank for Reconstruction
and Development (IBRD)
Multilateral
Investment
Guaranty Agency
International
Development
Association
International
Finance
Corporation
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1. Boost international monetary cooperation
2. Facilitate international trade
3. Stabilize exchange arrangements
4. Foster multilateral payment system
5. Build confidence of members
6. Adjust international balance of payments
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International Monetary Fund
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IMF Membership
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The Quota System
Borrowing
Power
Official
Reserves
Voting
Power
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Dollar-Based Gold Standard
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Fixed ExchangeRate
Adjustable PegSystem
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Challenges to the Bretton Woods System
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Value of
British Pound(1967)
Value of
French Franc(1969)
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The Triffin Paradox
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High International Liquidity
Low International LiquidityLess
More Less
More
Ow
n D
olla
rsS
ell Dollars
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The End of the Bretton Woods System
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Special
Drawing Rights
(1967)
President
Nixon’s Speech
(1971)
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Summary of Discussion
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Performance of the IMF Since 1971
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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 23
Flexible Exchange Rate
Supply and
Demand
Managed
Float
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International Conferences
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Jamaica
Agreement
European
Monetary System
The Louvre AccordThe Plaza Accord
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Start of the International Debt Crisis
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Soaring Oil Prices (1973 – 1974) and (1978 – 1979)
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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 26
Debt Crisis Approaches
The Baker Plan
The Brady Plan
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Recent Financial Crises
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Asian Currency
Crisis
Subprime
Meltdown
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Summary of Discussion
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The Balance of Payments Accounting System
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BOP Statistics
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Emerging
MarketsBusiness Climate
Foreign Exchange-
Rate ReservesLending Risks
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Important Aspects of the BOP Accounting System
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Transactions
Time Period Monetary Value
Between Countries Double-Entry
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Major Components of the BOP System
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•Current Account
•Capital Account
•Official Reserves
•Errors and Omissions
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The Current Account
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Services of
Capital
Merchandise
Trade
Unilateral
Transfers
Services
Trade
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The Capital Account
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Foreign Direct Investment (FDI)
Foreign Portfolio Investment (FPI)
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Inflows and Outflows of Capital in the BOP System
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Current Account Transactions Credit Debit
Foreign Ownership of Assets Increases
Ownership of Foreign Assets Declines
Ownership of Foreign Assets Increases
Foreign Ownership of Assets Declines
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Official Reserves Account
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Gold SDRs
IMF Reserve
Positions
Convertible
Currencies
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Errors and Omissions
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Inaccurate
StatisticsFlight Capital
Legal
Transactions
Balancing the BOP
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Summary of Discussion
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Defining Balance of Payments Surplus and Deficit
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Balance on Trade in Goods and Services
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•Manufacturing
•Services Sector
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Additional Measures of Global Economic Performance
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Balance on Merchandise Trade
Balance on Services
Current Account Balance
Official Settlements Balance
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Summary of Discussion
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Chapter 7
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International Monetary System and the Balance
of Payments
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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 44
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