Matakuliah
Tahun
: J0114-Teori Ekonomi
: 2009
EXCHANGE RATE, THE BALANCE OF
PAYMENTS, AND TRADE DEFICITS
Pertemuan 26
Financing International Trade
•
•
•
•
U.S. Export Transactions
U.S. Import Transactions
Balance of Payments
The Current Account
W36.1
– Balance on Goods
– Balance on Services
– Trade Deficit
– Trade Surplus
– Balance on Current Account
Bina Nusantara University
3
Financing International Trade
GLOBAL PERSPECTIVE
U.S. Trade Balances in Goods and Services
Select Nations, 2004
Good and Services Deficit
Goods and Services Surplus
+6.8
Australia
+4.4
Belgium
Canada -66.5
China
-162
Germany -45.8
Japan
-75.6
Mexico
-45.1
Netherlands
Bina Nusantara University
+11.8
4
Source: BEA
-160
-70 -60 -50 -40 -30 -20 -10
10 20
Capital and Financial Account
• Capital Account
• Financial Account
• Balance on the Capital and Financial
Account
– Payments, Deficits, and Surpluses
– Balance-of-Payments Deficits and Surpluses
– Official Reserves
Bina Nusantara University
5
G36.1
Flexible Exchange Rates
•
•
•
•
Flexible or Floating Exchange Rates
Fixed Exchange Rate system
Depreciation and Appreciation
Determinants of Exchange Rates
– Changes in Tastes
– Relative Income Changes
– Relative Price-Level Changes
• Purchasing-Power-Parity Theory
– Relative Interest Rates
– Speculation
Bina Nusantara University
6
Flexible Exchange Rates
The Market for Foreign Currency (Pounds)
P
Dollar Price of 1 Pound
Sl
$3
$2
Dollar
Depreciates
(Pound
Appreciates)
Exchange
Rate: $2 = £1
Dollar
Appreciates
(Pound
Depreciates)
$1
Dl
Bina Nusantara University
0
Ql
Quantity of Pounds
Q
7
Flexible Exchange Rates
The Market for Foreign Currency (Pounds)
P
Dollar Price of 1 Pound
Sl
c
$3
a
x
Exchange
Rate:
$3 = £1
Balance
Of Payments
Deficit
b
$2
D2
Exchange
Rate:
$2 = £1
$1
Dl
0
Bina Nusantara University
Ql
Quantity of Pounds
Q2
Q
8
Flexible Exchange Rates
• Flexible Rates and the Balance of
Payments
• Disadvantages of Flexible Exchange
Rates
• Uncertainty and Diminished Trade
• Terms-of-Trade Changes
• Instability
Bina Nusantara University
9
Fixed Exchange Rates
• Use of Reserves
– Currency Interventions
• Trade Policies
• Exchange Controls and Rationing
–
–
–
–
Distorted Trade
Favoritism
Restricted Choice
Black Markets
• Domestic Macroeconomic Adjustments
Bina Nusantara University
10
International Exchange-Rate Systems
• The Gold Standard: Fixed Exchange
Rates
–
–
–
–
Bina Nusantara University
Devaluation
Gold Flows
Domestic Macroeconomic Adjustments
Collapse of the Gold Standard
11
International Exchange-Rate Systems
• The Bretton Woods System
– International Monetary Fund (IMF)
– IMF and Pegged Exchange Rates
• Official Reserves
• Gold Sales
• IMF Borrowing
– Fundamental Imbalances: Adjusting the Peg
– Demise of the Bretton Woods System
• The Current System: The Managed Float
– Managed Floating Exchange Rates
Bina Nusantara University
• In Support of the Managed Float
• Concerns With the Managed Float
12