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1、Multinational Financial Management（跨国公司财务管理）ch05 International Economic Linkages and Balance of PaymentsPART I.BALANCE-OF-PAYMENTCATEGORIESA.THE BALANCE OF PAYMENTS(B-O-P)1.PURPOSE:Measures all financial and economic transactions over a specified period of time.BALANCE-OF-PAYMENTCATEGORIES2.Double-e
2、ntry bookkeepinga.Currency inflows=credits earn foreign exchangeb.Currency outflows=debits expend foreign exchangeBALANCE-OF-PAYMENTCATEGORIES3.Three Major Accounts:a.Currentb.Capitalc.Official Reserves4.Current Accountrecords net flow of goods,services,and unilateral transfers.BALANCE-OF-PAYMENTCAT
3、EGORIES 5.Capital Accounta.Function:records public and private investment and lending.b.Inflows=creditsc.Outflows=debitsBALANCE-OF-PAYMENTCATEGORIES6.Official Reserves Account(cont)b.Reserves consist of 1.)gold2.)convertible securities BALANCE-OF-PAYMENTCATEGORIES7.Net Effects:a.Sum of all transacti
4、ons must be zero:1.)current account2.)capital account3.)official reservesBALANCE-OF-PAYMENTCATEGORIES8.The Balance-of-payment measuresa.Some Definitions:1.)Basic Balancea.)consists of current account and long-term capital flows.BALANCE-OF-PAYMENTCATEGORIES1.)Basic Balance(cont)b.)emphasizes long-ter
5、m trends.BALANCE-OF-PAYMENTCATEGORIES1.)Basic Balance(cont)c.)excludes short-term capital flows that heavily depend on temporary factors.BALANCE-OF-PAYMENT CATEGORIES2.)Net Liquidity Balance:measures the change in private domestic borrowing or lending require to keep payments equal without adjusting
6、 official reserves.BALANCE-OF-PAYMENTCATEGORIES3.)Official Reserve Transactions Balance-measures adjustments needed by official reserves.PART II.THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALII.LINKS FROM INTERNATIONAL TO DOMESTIC FLOWS A.Global Linkagesset of basic macroeconomic identities wh
7、ich link:domestic spending and production to current and capital accountsTHE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALB.Domestic Savings and Investmentand the Capital Account1.National Income Accounting a.National Income(NI)is either spent(C)or saved(S)NI=C +S(5.1)THE INTERNATIONAL FLOW OF GO
8、ODS,SERVICES,AND CAPITALb.National spending(NS)is divided into personal spending(C)and investment(I)NS =C +I(5.2)THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALc.Subtracting(4.2)-(4.1)NI-NS =S -I(5.3)If NI NS,S I which implies that surplus capital spent overseas.THE INTERNATIONAL FLOW OF GOODS,
9、SERVICES,AND CAPITALd.In a freely-floating system,excess saving=the capital account balancee.Implications:1.A nation which produces more than it spends will save more than it invests domestically with a net capital outflow producing a capital account deficit.THE INTERNATIONAL FLOW OF GOODS,SERVICES,
10、AND CAPITAL2.A nation which spends more than it produces has a net capital inflow producing a capital account surplus.3.A healthy economy will tend torun a current account deficit.THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALC.THE LINK BETWEEN THE CURRENT AND CAPITAL ACCOUNTS1.Beginning ident
11、ityNI-NS=X-M(5.4)where X =exportsM=importsX-M=current account balance(CA)THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITAL2.Combining(5.3)+(5.4)S -I =X -M(5.5)3.If S-I=Net Foreign Investment (NFI)NFI =X -M(5.6)THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITAL4.Implications:a.If CA is in surplu
12、s,the nation must be a net exporter of capital.b.If CA is a deficit,the nation is a major capital importer.c.When NS NI,the excess must be acquired through foreign trade.THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALd.Solutions for Improving CA deficits:1.)Raise national income(output)relative
13、 to domestic investment(I).2.)Increase(S)relative to domestic investment(I).THE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITALD.GOVERNMENT BUDGETS AND CURRENT ACCOUNT DEFICITS1.CURRENT ACCOUNT BALANCE CA=Saving Surplus-Govt budget deficitTHE INTERNATIONAL FLOW OF GOODS,SERVICES,AND CAPITAL2.CA Def
14、icit meansthe nation is not saving enough to finance(I)and the deficit.3.CA Surplus meansthe nation is saving more than needed to finance its(I)and deficit.PART III.COPING WITH THE CURRENT ACCOUNT DEFICIT I.POSSIBLE SOLUTIONS UNLIKELY TOWORK:A.Currency DepreciationB.ProtectionismCOPING WITH THE CURR
15、ENT ACCOUNT DEFICITII.CURRENCY DEPRECIATIONA.U.S.Experience:Does not improve the trade deficit.COPING WITH THE CURRENT ACCOUNT DEFICITB.Depreciations are ineffective because1.It takes time to affect trade.2.J-Curve Effectstates that a decline in currency value will initially worsen the deficit befor
16、e improvement.THE J-CURVE TIMENet changein trade balance0Currency depreciationTrade balance initially deterioratesTrade balanceimprovesCOPING WITH THE CURRENT ACCOUNT DEFICITIII.PROTECTIONISMA.Trade Barriers used:1.Tariffs2.QuotasB.Results:Most likely will reduce both X and M.COPING WITH THE CURRENT
17、 ACCOUNT DEFICITC.FOREIGN OWNERSHIPone protectionist solution would place limits on or eliminate foreign ownership leading to capital inflows.COPING WITH THE CURRENT ACCOUNT DEFICITD.STIMULATE NATIONAL SAVINGchange the tax regulations and rates.COPING WITH THE CURRENT ACCOUNT DEFICITIII.SUMMARY:CURRENT-ACCOUNTDEFICITS-neither bad nor good inherently1.Since one countrys exports are anothers imports,it is not possible for all to run a surplusCOPING WITH THE CURRENT ACCOUNT DEFICIT2.Deficits may be a solution to the problem of different national propensities to save and invest.