Advanced Economics - master

5  1    61 schede    dieppei
Scarica mp3 Stampa Gioca Testa il tuo livello
 
Domanda English Risposta English
Balance of payments (BoP)
inizia ad imparare
The balance of payments is the record of all international financial transactions made by a country's residents. A country's balance of payments tells you whether it saves enough to pay for its imports.
BOP components
inizia ad imparare
They are the financial account, the capital account and the current account.
Financial Account
inizia ad imparare
The financial account describes the change in international ownership of assets.
Capital account
inizia ad imparare
The capital account includes any financial transactions that don't affect economic output.
Current account
inizia ad imparare
The current account measures international trade, the net income on investments and direct payments.
Balance of payments’ implications for the exchange rate market
inizia ad imparare
A change in a country's balance of payments can cause fluctuations in the exchange rate between its currency and foreign currencies. The reverse is also true when a fluctuation in relative currency strength can alter the balance of payments.
Balance of payments’ implications for exchange rate market part 2
inizia ad imparare
There are two different and interrelated markets at work: the market for all financial transactions on the international market (balance of payments) and the supply and demand for a specific currency (exchange rate).
Balance of payments’ implications for exchange rate market part 2
inizia ad imparare
These conditions only exist under a free or floating exchange rate regime. The balance of payments does not impact the exchange rate in a fixed-rate system because central banks adjust currency flows to offset the international exchange of funds.
Saving and Investment - Close economy
inizia ad imparare
GDP Y= C + I+ G
Saving and Investment - Close economy part 2
inizia ad imparare
A closed economy does not engage in international trade in goods and services. Investment must equal saving (S=I).
Investment Saving Open economy
inizia ad imparare
GDP Y= C + I + G + NX, investment equals saving + capital inflow
IS Without government
inizia ad imparare
we do not include government expenditure.
is With government
inizia ad imparare
: Government expenditure refers to government purchases of goods and services; Taxes includes transfer payments.
The foreign exchange market (Forex, FX, or currency market
inizia ad imparare
is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines the foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.
Forex actors
inizia ad imparare
Actors: At the top is the interbank foreign exchange market, which is made up of the largest commercial banks and securities dealers. Commercial companies, central banks, investment management firms, retails foreign exchange traders,
Forex INSTRUMENTS
inizia ad imparare
A spot transaction is a two-day delivery transaction (except of trades between the US dollar, Canadian dollar, Turkish lira, euro and Russian ruble, which are next business day), as opposed to the futures contracts, which are three usually months.
(INSTRUMENT) FORWARD TRANSACTION
inizia ad imparare
. In this transaction, money does not actually change hands until some agreed upon future date. Non Deliverable forward: Forex banks, ECNs, and prime brokers offer NDF contracts, which are derivatives that have no real deliver-ability.
SWAP:
inizia ad imparare
The most common type of forward transaction is the foreign exchange swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date.
Futures
inizia ad imparare
are standardized forward contracts and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
foreign exchange option (or FX option)
inizia ad imparare
is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.
The nominal effective exchange rate (NEER)
inizia ad imparare
is an unadjusted weighted average rate at which one country's currency exchanges for a basket of multiple foreign currencies. In economics, the NEER is an indicator of a country's international competitiveness in terms of the foreign exchange market.
The real effective exchange rate (REER)
inizia ad imparare
weighted average of a country's currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation.
REER part 2
inizia ad imparare
This exchange rate is used to determine an individual country's currency value relative to the other major currencies in the index, such as the U.S. dollar, Japanese yen and the euro.
Purchasing Power Parity
inizia ad imparare
(law of one price – Big Mac or Starbuck’s Latte parities)
PPP
inizia ad imparare
compares different countries' currencies through a market "basket of goods" approach. Exchange rate between one currency and another is in equilibrium when their domestic purchasing powers= exchange. Cost of good in one currency/cost of good in second cur
Absolute ppp:
inizia ad imparare
A country with a relatively high inflation rate will have a depreciating currency and vice versa. Q=1
Relative ppp
inizia ad imparare
changes in the nominal exchange rates equals the difference in the inflation rates between two countries. An increase in prices decreases competitivity of a country and leads to a depreciation of its currency.
The Big Mac index
inizia ad imparare
suggests that changes in exchange rates between currencies should affect the price that consumers pay for a Big Mac in a particular nation, replacing the "basket" with the famous hamburger.
The law of one price
inizia ad imparare
says that the same good in different competitive markets must sell for the same price. Transportation costs and barriers between markets are not important.
net international investment position (NIIP)
inizia ad imparare
(NIIP) measures the gap between a nation’s stock of foreign assets and a foreigner's stock of that nation's assets. Essentially, it can be viewed as a nation’s balance sheet with the rest of the world at a specific point in time.
Absorption
inizia ad imparare
absorption is the total demand for all final marketed goods and services by all economic agents, regardless of the origin of the goods and services themselves. absorption = consumption + imports
Main endogeneous variables and links between them
inizia ad imparare
Y, P, Pe, S, Se, R, r, Q
Real exchange rates
inizia ad imparare
(REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country's currency against that of each country in the index.
Real interest rate
inizia ad imparare
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor.
Real interest rate formula
inizia ad imparare
Real Interest Rate = Nominal Interest Rate minus Inflation (Expected or Actual)
Exogenous and pre-determined variables
inizia ad imparare
all foreign variables, Total financial wealth of the domestic private sector (WP), Stock of domestic government bonds outstanding (B)
Policy variables
inizia ad imparare
T, G, M
The Gold Standard
inizia ad imparare
was a system under which nearly all countries fixed the value of their currencies in terms of a specified amount of gold, or linked their currency to that of a country which did so.
The Gold Standard part 2
inizia ad imparare
Domestic currencies were freely convertible into gold at the fixed price and there was no restriction on the import or export of gold. Gold coins circulated as domestic currency alongside coins of other metals and notes with the composition vary bycountry
The Gold Standard part 3
inizia ad imparare
As each currency was fixed in terms of gold, exchange rates between participating currencies were also fixed.
Central banks had two overriding monetary policy functions under the classical Gold Standard:
inizia ad imparare
1. Maintaining convertibility of fiat currency into gold at the fixed price and defending the exchange rate. 2. Speeding up the adjustment process to a balance of payments imbalance, although this was often violated.
A central bank could manipulate the gold points
inizia ad imparare
using so-called ‘gold devices’ in order to increase or decrease the profitability of exporting gold and therefore the flow of gold.
Form of the UIP under (credible) fixed exchange rate model
inizia ad imparare
Uncovered interest rate parity theory states the difference in interest rates between two countries will equal the relative change in currency foreign exchange rates over the same period.
Form of the UIP under (credible) fixed exchange rate model part 2
inizia ad imparare
If the uncovered interest rate parity relationship does not hold, then there is an opportunity to make a risk-free profit using currency arbitrage or Forex arbitrage.
Efficiency of monetary vs. fiscal policy under fixed exchange rates
inizia ad imparare
In the Mundell-Fleming framework, the two versions (fixed and float) produce diametrically opposed results concerning the effectiveness of fiscal and monetary policies
Efficiency of monetary vs. fiscal policy under fixed exchange rates part 2
inizia ad imparare
As we recall, under a floating rate, fiscal policy was ineffective and monetary policy was very effective. Under a fixed rate, monetary policy is ineffective and fiscal policy is very effective.
Consequences of an increase / decrease of foreign interest rates
inizia ad imparare
Generally, higher interest rates increase the value of a country's currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country's currency.
Permanent shock
inizia ad imparare
is a shock whose effects on current values of a variable never die out in absolute terms.
Transitory shock
inizia ad imparare
is a shock whose effects gradually die out.
rules of thumb (when to choose which type regime)
inizia ad imparare
A rule of thumb is a guideline that provides simplified advice regarding a particular subject. It is a general principle that gives practical instructions for accomplishing or approaching a certain task.
Balassa-Samuelson effect
inizia ad imparare
Balassa-Samuelson effect is a phrase that describes the result when countries with high productivity growth also experience high wage growth, which leads to higher real exchange rates.
Gravity Model
inizia ad imparare
The gravity model suggests that relative economic size attracts countries to trade with each other while greater distances weaken the attractiveness
gravity theory
inizia ad imparare
an economy will gravitate towards trading with its closest neighbours and economies which are similar in terms of size, cultural preferences and stage of development.
Fiat Money
inizia ad imparare
Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. Most modern paper currencies are fiat currencies,U. S dollar, euro, and some major currencies
Comparative Advantage
inizia ad imparare
is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade.
Classical theories (Ricardo vs. Heckscher-Ohlin) part 1
inizia ad imparare
1. No difference among internal and international trade
According to the Classical economists, there is a need for a separate theory of international trade because of the differences between internal and international trade.
inizia ad imparare
.
Classical theories (Ricardo vs. Heckscher-Ohlin)
inizia ad imparare
1. No difference among internal and international trade
According to the Classical economists, there is a need for a separate theory of international trade because of the differences between internal and international trade.
inizia ad imparare
But according to Ohlin, there is no need for a separate theory of international trade, as fundamental principle of both is same.
As against Ricardian Theory which is based on two countries, two commodities and one factor
inizia ad imparare
Ohlin's Modern theory incorporates two countries two commodities and two factors.
Concavity of production possibility frontier (diseconomies of scale)
inizia ad imparare
Most of the PPF curves are concave due to the inadaptability of the resources. The law of increasing opportunity cost states: as the production of one good rises, the opportunity cost of producing that good increases.

Devi essere accedere per pubblicare un commento.