Griffin ib7 inppt_07
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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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Griffin ib7 inppt_07
Transcript of Griffin ib7 inppt_07
Chapter 7
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 7 - 1
International Monetary System and the Balance
of Payments
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
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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
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
Collapse of Gold Standard
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•World War I
•Great Depression
•World War II
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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The International Bank for Reconstruction and Development
13
Reconstruct
Europe
Assist
Developing
Countries
Official Name of the World Bank
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
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
IMF Membership
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The Quota System
Borrowing
Power
Official
Reserves
Voting
Power
Dollar-Based Gold Standard
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Fixed ExchangeRate
Adjustable PegSystem
Challenges to the Bretton Woods System
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Value of
British Pound(1967)
Value of
French Franc(1969)
The Triffin Paradox
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High International Liquidity
Low International LiquidityLess
More Less
More
Ow
n D
olla
rsS
ell Dollars
The End of the Bretton Woods System
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Special
Drawing Rights
(1967)
President
Nixon’s Speech
(1971)
Summary of Discussion
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Performance of the IMF Since 1971
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Flexible Exchange Rate
Supply and
Demand
Managed
Float
International Conferences
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Jamaica
Agreement
European
Monetary System
The Louvre AccordThe Plaza Accord
Start of the International Debt Crisis
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Soaring Oil Prices (1973 – 1974) and (1978 – 1979)
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Debt Crisis Approaches
The Baker Plan
The Brady Plan
Recent Financial Crises
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Asian Currency
Crisis
Subprime
Meltdown
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
Important Aspects of the BOP Accounting System
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Transactions
Time Period Monetary Value
Between Countries Double-Entry
Major Components of the BOP System
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•Current Account
•Capital Account
•Official Reserves
•Errors and Omissions
The Current Account
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Services of
Capital
Merchandise
Trade
Unilateral
Transfers
Services
Trade
The Capital Account
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Foreign Direct Investment (FDI)
Foreign Portfolio Investment (FPI)
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
Official Reserves Account
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Gold SDRs
IMF Reserve
Positions
Convertible
Currencies
Errors and Omissions
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Inaccurate
StatisticsFlight Capital
Legal
Transactions
Balancing the BOP
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
Additional Measures of Global Economic Performance
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Balance on Merchandise Trade
Balance on Services
Current Account Balance
Official Settlements Balance
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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