托马斯国际金融课后习题答案修订稿

托马斯国际金融课后习

题答案

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Suggested answers to questions and problems

(in the textbook)

Chapter 2

2. Disagree, at least as a general statement. One meaning of a current account surplus is

that the country is exporting more goods and services than it is importing. One might

easily judge that this is not good—the country is producing goods and services that are exported, but the country is not at the same time getting the imports of goods and

services that would allow it do more consumption and domestic investment. In this way

a current account deficit might be considered good—the extra imports allow the

country to consume and invest domestically more than the value of its current

production. Another meaning of a current account surplus is that the country is

engaging in foreign financial investment—it is building up its claims on foreigners, and this adds to national wealth. This sounds good, but as noted above it comes at the cost of foregoing current domestic purchases of goods and services. A current account

deficit is the country running down its claims on foreigners or increasing its

indebtedness to foreigners. This sounds bad, but it comes with the benefit of higher

levels of current domestic expenditure. Different countries at different times may weigh the balance of these costs and benefits differently, so that we cannot simply say that a

current account surplus is better than a current account deficit.

4. Disagree. If the country has a surplus (a positive value) for its official settlements

balance, then the value for its official reserves balance must be a negative value of the same amount (so that the two add to zero). A negative value for this asset item means

that funds are flowing out in order for the country to acquire more of these kinds of

assets. Thus, the country is increasing its holdings of official reserve assets.

6. Item e is a transaction in which foreign official holdings of . assets increase. This is a

positive (credit) item for official reserve assets and a negative (debit) item for private

capital flows as the . bank acquires pound bank deposits. The debit item contributes to

a . deficit in the official settlements balance (while the credit item is recorded "below

the line," permitting the official settlements balance to be in deficit). All other

transactions involve debit and credit items both of which are included in the official

settlements balance, so that they do not directly contribute to a deficit (or surplus) in the official settlements balance.

8. a. Merchandise trade balance: $330 - 198 = $132

Goods and services balance: $330 - 198 + 196 - 204 = $124

Current account balance: $330 - 198 + 196 - 204 + 3 - 8 = $119

Official settlements balance: $330 - 198 + 196 - 204 + 3 - 8 + 102 - 202 + 4 = $23

b. Change in official reserve assets (net) = - official settlements balance = -$23.

The country is increasing its net holdings of official reserve assets.

10. a. International investment position (billions): $30 + 20 + 15 - 40 - 25 = $0.

The country is neither an international creditor nor a debtor. Its holding of international assets equals its liabilities to foreigners.

b. A current account surplus permits the country to add to its net claims on foreigners. For

this reason the country's international investment position will become a positive value.

The flow increase in net foreign assets results in the stock of net foreign assets

becoming positive.

Chapter 3

2. Exports of merchandise and services result in supply of foreign currency in the foreign

exchange market. Domestic sellers often want to be paid using domestic currency,