Bài giảng International Business - Chapter five: Understanding the International Monetary System

Understanding the International Monetary SystemMcGraw-Hill/IrwinInternational Business, 11/eCopyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.chapter fiveLearning ObjectivesExplain the functioning of the gold standardDescribe the purposes of the IMFAppreciate the accomplishments of Bretton Woods system and the ensuing developments shaping the world monetary systemDescribe the purpose of the World BanksDiscuss the purpose of the Bank for International Settlements3Learning ObjectivesDiscuss the floating exchange rate systemDescribe the development of the euroExplain the role of the Balance of Payments (BOP)Discuss the major BOP accountsExplain the use of Special Drawing Rights (SDRs)4Gold StandardGold Standard The use of gold at an established number of units per currencyBretton WoodsThe New Hampshire town where treasury and central bank representatives met near the end of World War II to establish the IMF, the World Bank, and the gold exchange standard5International Monetary FundInternational Monetary Fund (IMF) Institution that coordinates multilateral monetary rules and their enforcementTriffin paradoxThe concept that a national currency that is also a reserve currency will eventually run a deficit, which eventually inspires a lack of confidence in the reserve currency and leads to a financial crisis. 6World BankWorld Bank Institution that focuses on funding of development projectsBank for International Settlements Institution that is the central bank for central bankers7Currency Exchange Rate SystemsFixed currency exchange rates Rates that governments agree on and undertake to maintainFloating currency exchanges rates Rates that are allowed to float against other currencies and are determined by market forcesJamaica AgreementThe 1976 IMF agreement that allows flexible exchange rates among members8Current Currency Exchange Rate ArrangementsExchange arrangements with no separate legal tenderCurrency board arrangementsOther conventional fixed peg arrangementsPegged exchange rates within horizontal bands9Current Currency Exchange Rate ArrangementsCrawling pegsExchange rates within crawling bandsManaged floating with no preannounced path for the exchange rateIndependently floating exchange rates10EuroCurrency of the European Union12 EU members have joined the European Monetary Union 11BOP Accounts Table 5.1Current account Records a country’s exports and imports in goods and servicesGoods or merchandise accountServices account Unilateral transfers 12BOP AccountsCapital account Records the net changes in a nation’s international financial assets and liabilitiesDirect investmentsPortfolio InvestmentsShort-term capital flowsOfficial Reserves account Records the assets held by the government; gold, foreign currencies, and accounts in foreign banks; a balance of the country’s foreign currency13Table 5.1 U.S. International Transactions (millions of dollars)14Special Drawing Rights Special Drawing Rights (SDR) An international reserve asset established by the IMFThe unit of account for the IMF and other international organizations15