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

Daniels and VanHoose International Monetary and Financial Economics, 2ed. Using the Power Point Files. Power Point Files. There are over twenty five files to accompany the text. Each filename consists of a number followed by a keyword. For example, 03debtrelief.

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

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

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

  3. 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. Using the PowerPoint Slides

  4. Viewing • 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. Using the PowerPoint Slides

  5. Viewing • 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.” Using the PowerPoint Slides

  6. Printing • To print the slides, click on file and then print. • 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. Using the PowerPoint Slides

  7. Printing • 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 master.” • Click on “Apply to All.” Using the PowerPoint Slides

  8. Introduction The Global Economy

  9. 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 Using the PowerPoint Slides

  10. 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. Using the PowerPoint Slides

  11. 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.” Using the PowerPoint Slides

  12. Our Focus • We shall focus on the institutions and markets that “connect” nations’ economies. • More specifically, we shall concentrate on financial sector linkages. Using the PowerPoint Slides

  13. Real and Financial Sectors • Real Sector: Production and sale of goods and services. • Financial Sector: Transactions in financial assets. Using the PowerPoint Slides

  14. 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. Using the PowerPoint Slides

  15. Growth of World Exports Using the PowerPoint Slides

  16. Growth of Trade and Foreign Exchange Transactions Using the PowerPoint Slides

  17. Stylized Facts • Unprecedented growth of FDI in the United States. • Unprecedented growth of M&A 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 world’s poorest economies mired in debt crises and economic stagnation. Using the PowerPoint Slides

  18. Capital Flows to Emerging Economies Using the PowerPoint Slides

  19. The Balance of Payments Accounting System International Bookkeeping

  20. 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). Using the PowerPoint Slides

  21. Balance of Payments • The current account is the broadest measure of a nation’s real sector trade. • Includes: • Goods • Services • Income Receipts and Payments • Unilateral Transfers Using the PowerPoint Slides

  22. Balance of Payments • Goods: Exports and imports of tangible items. • Services: Exports and imports of services, for example: • Typical business services such as banking and financial services, insurance, and consulting. • Tourism Using the PowerPoint Slides

  23. Balance of Payments • Income Receipts: Includes items such as • Investment income on US-owned assets abroad. • Receipts of income on US direct investment abroad. • Government income receipts Using the PowerPoint Slides

  24. 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 Using the PowerPoint Slides

  25. Balance of Payments • Unilateral Transfers: Includes items such as: • Government grants abroad • Private remittances • Private grants abroad Using the PowerPoint Slides

  26. Balance of Payments (2000) Using the PowerPoint Slides

  27. 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. Using the PowerPoint Slides

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

  29. 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 transactions. Using the PowerPoint Slides

  30. 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 banks. Using the PowerPoint Slides

  31. 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) Using the PowerPoint Slides

  32. Capital and Financial Account (2000) Using the PowerPoint Slides

  33. The Balance of PaymentsThe Statistical Discrepancy Using the PowerPoint Slides

  34. International Debt Debt Relief for the Poorest Nations?

  35. 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. Using the PowerPoint Slides

  36. The US and Net Debtor Status • It is neither necessarily good nor bad to be a net debtor. • The US is the world’s 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. Using the PowerPoint Slides

  37. 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. Using the PowerPoint Slides

  38. 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 Using the PowerPoint Slides

  39. 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. Using the PowerPoint Slides

  40. 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. Using the PowerPoint Slides

  41. 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. Using the PowerPoint Slides

  42. Problems • 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. Using the PowerPoint Slides

  43. Current Status • For current information on HIPC, visit the web sites of the International Monetary Fund and the World Bank. Using the PowerPoint Slides

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