International Finance: Theory and Policy

Table of Contents

• Licensing Information

• Preface

• Chapter 1: Introductory Finance Issues: Current Patterns, Past History, and International Institutions

  • The International Economy and International Economics
  • GDP, Unemployment, Inflation, and Government Budget Balances
  • Exchange Rate Regimes, Trade Balances, and Investment Positions
  • Business Cycles: Economic Ups and Downs
  • International Macroeconomic Institutions: The IMF and the World Bank

• Chapter 2: National Income and the Balance of Payments Accounts

  • National Income and Product Accounts
  • National Income or Product Identity
  • U.S. National Income Statistics (2007–2008)
  • Balance of Payments Accounts: Definitions
  • Recording Transactions on the Balance of Payments
  • U.S. Balance of Payments Statistics (2008)
  • The Twin-Deficit Identity
  • International Investment Position

• Chapter 3: The Whole Truth about Trade Imbalances

  • Overview of Trade Imbalances
  • Trade Imbalances and Jobs
  • The National Welfare Effects of Trade Imbalances
  • Some Further Complications
  • How to Evaluate Trade Imbalances

• Chapter 4: Foreign Exchange Markets and Rates of Return

  • The Forex: Participants and Objectives
  • Exchange Rate: Definitions
  • Calculating Rate of Returns on International Investments
  • Interpretation of the Rate of Return Formula
  • Applying the Rate of Return Formulas

• Chapter 5: Interest Rate Parity

  • Overview of Interest Rate Parity
  • Comparative Statics in the IRP Theory
  • Forex Equilibrium with the Rate of Return Diagram
  • Exchange Rate Equilibrium Stories with the RoR Diagram
  • Exchange Rate Effects of Changes in U.S. Interest Rates Using the RoR Diagram
  • Exchange Rate Effects of Changes in Foreign Interest Rates Using the RoR Diagram
  • Exchange Rate Effects of Changes in the Expected Exchange Rate Using the RoR Diagram

• Chapter 6: Purchasing Power Parity

  • Overview of Purchasing Power Parity (PPP)
  • The Consumer Price Index (CPI) and PPP
  • PPP as a Theory of Exchange Rate Determination
  • Problems and Extensions of PPP
  • PPP in the Long Run
  • Overvaluation and Undervaluation
  • PPP and Cross-Country Comparisons

• Chapter 7: Interest Rate Determination

  • Overview of Interest Rate Determination
  • Some Preliminaries
  • What Is Money?
  • Money Supply Measures
  • Controlling the Money Supply
  • Money Demand
  • Money Functions and Equilibrium
  • Money Market Equilibrium Stories
  • Effects of a Money Supply Increase
  • Effect of a Price Level Increase (Inflation) on Interest Rates
  • Effect of a Real GDP Increase (Economic Growth) on Interest Rates
  • Integrating the Money Market and the Foreign Exchange Markets
  • Comparative Statics in the Combined Money-Forex Model
  • Money Supply and Long-Run Prices

• Chapter 8: National Output Determination

  • Overview of National Output Determination
  • Aggregate Demand for Goods and Services
  • Consumption Demand
  • Investment Demand
  • Government Demand
  • Export and Import Demand
  • The Aggregate Demand Function
  • The Keynesian Cross Diagram
  • Goods and Services Market Equilibrium Stories
  • Effect of an Increase in Government Demand on Real GNP
  • Effect of an Increase in the U.S. Dollar Value on Real GNP
  • The J-Curve Effect

• Chapter 9: The AA-DD Model

  • Overview of the AA-DD Model
  • Derivation of the DD Curve
  • Shifting the DD Curve
  • Derivation of the AA Curve
  • Shifting the AA Curve
  • Superequilibrium: Combining DD and AA
  • Adjustment to the Superequilibrium
  • AA-DD and the Current Account Balance

• Chapter 10: Policy Effects with Floating Exchange Rates

  • Overview of Policy with Floating Exchange Rates
  • Monetary Policy with Floating Exchange Rates
  • Fiscal Policy with Floating Exchange Rates
  • Expansionary Monetary Policy with Floating Exchange Rates in the Long Run
  • Foreign Exchange Interventions with Floating Exchange Rates

• Chapter 11: Fixed Exchange Rates

  • Overview of Fixed Exchange Rates
  • Fixed Exchange Rate Systems
  • Interest Rate Parity with Fixed Exchange Rates
  • Central Bank Intervention with Fixed Exchange Rates
  • Balance of Payments Deficits and Surpluses
  • Black Markets

• Chapter 12: Policy Effects with Fixed Exchange Rates

  • Overview of Policy with Fixed Exchange Rates
  • Monetary Policy with Fixed Exchange Rates
  • Fiscal Policy with Fixed Exchange Rates
  • Exchange Rate Policy with Fixed Exchange Rates
  • Reserve Country Monetary Policy under Fixed Exchange Rates
  • Currency Crises and Capital Flight
  • Case Study: The Breakup of the Bretton Woods System, 1973

• Chapter 13: Fixed versus Floating Exchange Rates

  • Overview of Fixed versus Floating Exchange Rates
  • Exchange Rate Volatility and Risk
  • Inflationary Consequences of Exchange Rate Systems
  • Monetary Autonomy and Exchange Rate Systems
  • Which Is Better: Fixed or Floating Exchange Rates?