国际金融(香港大学,WONG Ka Fu) bop
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Balance of Payments
WONG Ka Fu 19th January 2000
1
International Transactions
Goods & services
A
B
Payment
2
Saving and Investment in the Open Economy
A country's spending need not equal its production in every period due to foreign trade The fundamental determinants of a country's trade position are its saving and investment decisions Home economy = domestic economy
Excess demand
D
HKD
17
Floating Exchange Rate Regime
Initially exchange rate at 1HD = x FD For the sake of illustrating how equilibrium exchange rate may be determined (although this case cannot happen), suppose CA > 0 and KA > 0 implies net demand for home currency implies 1 HD = y FD and y > x i.e., home currency appreciates
9
Balance of Payments
Official settlements balance is also called the balance of payments, it equals the net increase in a country's official reserve assets For the home country, the net increase in official reserve assets is the rise in home government reserve assets minus foreign central bank holdings of home dollar assets
18
Floating Exchange Rate Regime
home goods and assets become more expensive demand for home goods and assets decreases demand for foreign goods and assets increases CA decreases and KA decreases
15
$/apple
Excess demand for apple will drive up the prs demand
D
Apple
16
JPY/HKD
Excess demand for HKD will drive up the price of HKD, i.e., JPY/HKD. S
The capital account records trades in existing assets, either real (for example, houses) or financial (for example, stocks and bonds) When home country sells assets to foreign country, that is a capital inflow for the home country and a credit (+) item in the capital account
6
The Official Settlements Balance
A component of capital account Transactions in official reserve assets are conducted by central banks around the world Official reserve assets are assets (foreign government securities, bank deposits, and special drawing rights of the IMF, gold) used in making international payments Central banks buy (or sell) official reserve assets with (or to obtain) their own currencies
20
Floating Exchange Rate Regime -- in general
Initially exchange rate at 1 HD = x FD In general, if CA + KA > 0, then net demand for home currency implies 1 HD = y FD and y > x i.e., home currency appreciates stop appreciation when CA + KA = 0
10
Nonzero Balance of Payments
Having a balance of payments surplus means a country is increasing its official reserve assets a balance of payments deficit is a reduction in official reserve assets
7
The Official Settlements Balance
Balance of official reserve transactions = The net increase in foreign official reserve claims on home country minus the net increase in home country’s official reserves. Thus, a sale (reduction) of official reserve asset enters positively into the balance of official reserve transactions. (as for all KA transactions, a sale is a credit term)
11
The Relationship Between CA and KA
CA + KA = 0 by accounting because every transaction involves offsetting effects In practice, measurement problems, recorded as a statistical discrepancy, prevent CA + KA = 0 from holding exactly.
8
The Official Settlements Balance
= current account balance + the nonreserve portion of the capital account balance + statistical discrepancy. = the balance of official reserve transactions with its sign reversed. = the payments gap that official reserve transactions need to cover.
12
Net Foreign Assets and the BOP Accounts
Net foreign assets are a country's foreign assets minus its foreign liabilities The net increase in foreign assets equals a country's CA surplus A CA surplus implies a KA deficit, and thus a net increase in holdings of foreign assets (a capital outflow), and vice versa.
13
A Country's International Trade and Lending
can be equivalently measured as CA surplus KA deficit net acquisition of foreign assets net foreign lending (if NFP and net unilateral transfers are zero) net exports
19
Floating Exchange Rate Regime
Initially exchange rate at 1 HD = y FD Suppose, still , CA > 0 and KA > 0 implies net demand for home currency implies 1 HD = z FD and z > y i.e., home currency appreciates . . . . . . .
14
Why do we care about BOP?
CA > 0 implies export > import demand for home currency
KA > 0 implies capital inflow > capital outflow demand for home currency
21
Fixed Exchange Rate Regime
CB promises to exchange at a rate 1 HD = x FD Suppose CA + KA > 0 net demand for home currency CB supplies home currency and receives foreign currency official reserve increases
3
Balance of Payments (BOP) Accounts
The record of a country's international transactions Any transaction that involves a flow of money into home economy is a credit (+) item (enters with a plus sign); for example, exports Any transaction that involves a flow of money out of home economy is a debit (-) item (enters with a minus sign); for example, imports
4
The Current Account (CA)
= Net exports of goods and services + Net investment income from assets abroad + Net unilateral transfers
5
The Capital Account (KA)
WONG Ka Fu 19th January 2000
1
International Transactions
Goods & services
A
B
Payment
2
Saving and Investment in the Open Economy
A country's spending need not equal its production in every period due to foreign trade The fundamental determinants of a country's trade position are its saving and investment decisions Home economy = domestic economy
Excess demand
D
HKD
17
Floating Exchange Rate Regime
Initially exchange rate at 1HD = x FD For the sake of illustrating how equilibrium exchange rate may be determined (although this case cannot happen), suppose CA > 0 and KA > 0 implies net demand for home currency implies 1 HD = y FD and y > x i.e., home currency appreciates
9
Balance of Payments
Official settlements balance is also called the balance of payments, it equals the net increase in a country's official reserve assets For the home country, the net increase in official reserve assets is the rise in home government reserve assets minus foreign central bank holdings of home dollar assets
18
Floating Exchange Rate Regime
home goods and assets become more expensive demand for home goods and assets decreases demand for foreign goods and assets increases CA decreases and KA decreases
15
$/apple
Excess demand for apple will drive up the prs demand
D
Apple
16
JPY/HKD
Excess demand for HKD will drive up the price of HKD, i.e., JPY/HKD. S
The capital account records trades in existing assets, either real (for example, houses) or financial (for example, stocks and bonds) When home country sells assets to foreign country, that is a capital inflow for the home country and a credit (+) item in the capital account
6
The Official Settlements Balance
A component of capital account Transactions in official reserve assets are conducted by central banks around the world Official reserve assets are assets (foreign government securities, bank deposits, and special drawing rights of the IMF, gold) used in making international payments Central banks buy (or sell) official reserve assets with (or to obtain) their own currencies
20
Floating Exchange Rate Regime -- in general
Initially exchange rate at 1 HD = x FD In general, if CA + KA > 0, then net demand for home currency implies 1 HD = y FD and y > x i.e., home currency appreciates stop appreciation when CA + KA = 0
10
Nonzero Balance of Payments
Having a balance of payments surplus means a country is increasing its official reserve assets a balance of payments deficit is a reduction in official reserve assets
7
The Official Settlements Balance
Balance of official reserve transactions = The net increase in foreign official reserve claims on home country minus the net increase in home country’s official reserves. Thus, a sale (reduction) of official reserve asset enters positively into the balance of official reserve transactions. (as for all KA transactions, a sale is a credit term)
11
The Relationship Between CA and KA
CA + KA = 0 by accounting because every transaction involves offsetting effects In practice, measurement problems, recorded as a statistical discrepancy, prevent CA + KA = 0 from holding exactly.
8
The Official Settlements Balance
= current account balance + the nonreserve portion of the capital account balance + statistical discrepancy. = the balance of official reserve transactions with its sign reversed. = the payments gap that official reserve transactions need to cover.
12
Net Foreign Assets and the BOP Accounts
Net foreign assets are a country's foreign assets minus its foreign liabilities The net increase in foreign assets equals a country's CA surplus A CA surplus implies a KA deficit, and thus a net increase in holdings of foreign assets (a capital outflow), and vice versa.
13
A Country's International Trade and Lending
can be equivalently measured as CA surplus KA deficit net acquisition of foreign assets net foreign lending (if NFP and net unilateral transfers are zero) net exports
19
Floating Exchange Rate Regime
Initially exchange rate at 1 HD = y FD Suppose, still , CA > 0 and KA > 0 implies net demand for home currency implies 1 HD = z FD and z > y i.e., home currency appreciates . . . . . . .
14
Why do we care about BOP?
CA > 0 implies export > import demand for home currency
KA > 0 implies capital inflow > capital outflow demand for home currency
21
Fixed Exchange Rate Regime
CB promises to exchange at a rate 1 HD = x FD Suppose CA + KA > 0 net demand for home currency CB supplies home currency and receives foreign currency official reserve increases
3
Balance of Payments (BOP) Accounts
The record of a country's international transactions Any transaction that involves a flow of money into home economy is a credit (+) item (enters with a plus sign); for example, exports Any transaction that involves a flow of money out of home economy is a debit (-) item (enters with a minus sign); for example, imports
4
The Current Account (CA)
= Net exports of goods and services + Net investment income from assets abroad + Net unilateral transfers
5
The Capital Account (KA)