国际金融学theory of balance of payments课件参考.ppt

Chinese Finance Research Institute I.3 Purchasing Power Parity P=SP* Where, P* denotes foreign price and S, the exchange rate as aforementioned. I.4 Money Market Equilibrium kSP*Y=R+D [*] I.5 Simple Illustrations From equation [*], we can easily obtain, kP*Y?S+kSY?P*+kSP*?Y=?R+?D ?S/S+?P*/P*+?Y/Y=(?R+?D)/M [**] Monetary Approach Monetary Approach Case 1: Fixed exchange rate regime When S keeps constant, [**] can be simplified as, ?R/M=?P*/P*+?Y/Y-?D/M This means that, in a fixed rate regime, if price and income being unchanging, domestic credit changes will lead to the changes of international reserves and changes of a country’s balance of payments (Why?). Figure 1-2-4 The Case of China (a) Source: PBC BIS. In %. Case 2: Floating rates In this case, international reserve is stable or not changing. The equation shows that changes of domestic credit will not induce international capital flows but will have a positive impact upon exchange rate changes. Monetary Approach Case 3: Dirty floats or intermediate regimes Under the circumstance, the central bank attempts to keep exchange rate at a desired level through intervention, therefore, both international capital flows and exchange rate changes may change over time. See Figure 1-2-5. Monetary Approach Figure 1-2-5 The Case of China (b) Source: PBC BIS. In %. II. Conclusions A small open economy has no control over the domestic money supply in the case of fixed exchange rate regime. The over expansion of domestic credit contributes to a country’s deficit. The theory also pays attention to the role of real sides of the economy on balance of payments. But in the view of monetarists, the effect works via the channel of money demands. Monetary Approach Any approach focuses on a single factor that may possibly affect a country’s balance of payments. In other words, the approaches we have discussed above explained the contributors of surplus or deficits