國際經(jīng)濟(jì)學(xué)國際貿(mào)易分冊,8e英文教師手冊習(xí)題答案ichap

1、The International Monetary System: Past, Present, and FutureChapter 29:Copyright 2014 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Learning ObjectivesIdentify the key characteristics of an effective monetary system.Describe the historical evolution of the international mo

2、netary system from Bretton Woods to the present time.Explain the purpose of the IMF and understand its strengths and weaknesses.Differentiate among existing alternative monetary arrangements.Compare and contrast several proposals for reform of the current international monetary system.IntroductionIn

3、ternational monetary systems facilitate movements of goods, services, and assets.Historically, international monetary systems have differed greatly.The gold standard (1880 1914). 1920s: considerable exchange rate flexibility.1930s: global economic downturn; competitive devaluations and high tariffs

4、limited trade.Bretton Woods: Goals of the IMFTo seek stability in exchange rates.Reconciliation of country adjustments to payments imbalances with national autonomy in macroeconomic policy.To help preserve relatively free trade and payments in the world economy.Bretton Woods: IMF LoansWhen a country

5、 joins the IMF, it agrees to pay a quota based on the size of its economy.Member countries can borrow foreign exchange from the IMF in tranches to help with BOP deficits.Additional loans may come with “strings attached” conditions requiring policy reform or currency valuation changes.Bretton Woods i

6、n Retrospect: 3 ProblemsThe Bretton Woods system worked well until the 1960s, when problems began to emerge.Adequacy of reserves (or liquidity)As volume of global trade grows, BOP imbalances will also grow.This demands increases in reserves.The supply of gold was not keeping pace.Bretton Woods in Re

7、trospect: 3 Problems2.ConfidenceSlow growth of gold supplies meant countries increasingly held foreign currency reserves (mainly $s and s).Dollar holdings by foreign countries grew well above U.S. gold holdings, so concern grew over convertibility3. AdjustmentCertain countries had prolonged BOP defi

8、cits or surpluses.These countries were using monetary and fiscal policies in ways that prevented BOP adjustments.Gradual Evolution of a New International Monetary SystemEarly disruptions1967: U.K. devalued the pound by 14%.Since the pound was a “key currency”, this raised serious doubts about the IM

9、Fs exchange rate pegs.1968: Central banks stopped gold transactions with private individuals and firmsGold now a “two-tier” market a private gold market now emerged.This reduced the importance of gold in the international monetary system.Special Drawing Rights (SDRs)In 1970, IMF created a new paper

10、asset called special drawing rights.Countries were allocated SDRs and could use them as international reserves to settle BOP deficits.If a country holds SDRs, it receives interest on excess holdings.Originally 1 SDR = $1.Today SDRs are a weighted average of the values of dollars, euros, yen, and pou

11、nds.Breaking the Gold-Dollar Link: the Smithsonian Agreement1971: U.S. stopped trading gold with foreign central banks.This effectively ended the Bretton Woods System.Later in 1971, the major countries met to work out a new exchange rate arrangement: the Smithsonian Agreement.Initially, countries we

12、re optimistic.However, continued currency speculation caused some countries to devalue or even float their currencies.The Jamaica Accords1976: IMF makes several changesEach member country can choose its own exchange rate system.Official gold price was abolished; IMF sold off one-third of its holding

13、s.SDRs were to e a more important reserve asset.IMF was to maintain surveillance of global exchange rate behavior and advise members.The European Monetary System1979: European countries begin to move towards a monetary union.The euro was created (at first it was only a unit of account).Exchange rate

14、s were to be kept within a narrow band of each other.The European Monetary Cooperation Fund was set up as a proto-European central bank.The European Monetary System: Maastricht1991: European countries agree to take steps towards the creation of a monetary union in 1999.The European Central Bank (ECB

15、) would serve as the supra-national central bank for member countries.In 1999, the 11 member countries fixed their exchange rates in relation to the euro.In 2002, euro notes and coins were issued.The European Monetary System: Maastricht“Euroland”: Austria, Belgium, Finland, France, Germany, Ireland,

16、 Italy, Luxembourg, the Netherlands, Portugal, and SpainThis system required convergence criteria:Inflation rates could not be too high.Long-term government bond interest rates could not be too high.Government budget deficits could not be too high.Government debt must be kept in check.The European M

17、onetary System: MaastrichtConvergence requirements presented major challenges.In the end only Greece was denied admission to the EMU (it later was admitted).Denmark, Sweden, and the U.K. elected to not join the EMU.Giving up sovereignty over monetary policy and giving up their domestic currencies we

18、re too great a step for these countries.The European Monetary System: Early ResultsThe transition to the euro went smoothly and was popular with citizens.Elimination of exchange rate and lower transactions costs has created new opportunities and has enhanced efficiency.The euro has helped further fi

19、nancial integration.The euro is the worlds second-most widely used currency.The European Monetary System: New EntrantsEuropean Union has added many new countries in the past decades.Once they meet convergence criteria, countries can apply to join the EMU.Greece (2001), Slovenia (2007), Cyprus (2008)

20、, Malta (2008), Slovak Republic (2009), Estonia (2011)Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, and Sweden will join the EMU once they meet the criteriaSince Bretton Woods: A SummaryFluctuations in the exchange rates among the major currencies have been very large since

21、the Bretton Woods system fell apart.As a result, international competitiveness has varied considerably, with substantial dislocations in export and peting sectors of countries.Current Exchange Rate ArrangementsAs of 1978, IMF member countries have the right to have whatever exchange rate systems the

22、y wish.A number of distinct exchange rate arrangements now exist, ranging from no flexibility to total flexibility.Sometimes this non-uniform collection of arrangements is called a “non-system.”Current Exchange Rate ArrangementsArrangements with no separate legal tender (a country uses the dollar or

23、 some other currency as its own)Complete absence of exchange rate flexibility10 countries have adopted this, e.g. Micronesia and Panama.Currency Boards (currency is fixed in value against an anchor currency)Ms can only increase if anchor currency holdings increase.13 countries, e.g. Bulgaria and Dom

24、inicaCurrent Exchange Rate ArrangementsConventional Pegs (minimal variation is allowed around a parity value set against a foreign currency)Pegs against the dollar: 14 countries, e.g. Aruba, TurkmenistanPegs against the euro: 19 countries, e.g. Denmark, NigerPegs against other currencies: 5 countrie

25、s, e.g. Lesotho, BhutanPegs against a composite basket of currencies: 5 countries, e.g. Libya, SamoaCurrent Exchange Rate ArrangementsOther pegs, including crawling pegs (greater variation is allowed around a parity value set against a foreign currency)Horizontal bands: TongaCrawling pegs: 15 countr

26、ies, e.g. Botswana, CroatiaStabilized Arrangement, e.g., Iran, VietnamCurrent Exchange Rate ArrangementsManaged floats (currency floats with occasional intervention)44 countries, e.g. Egypt, UruguayFloats (the value of currency is determined by markets with only rare intervention)many countries, e.g

27、. the EU, Mexico, the U.S.Experience Under the Current International Monetary SystemThe international monetary system for industrialized countries can be characterized as a managed float.What is the consensus about the operation of that system?Experience Under the Current International Monetary Syst

28、emThe international monetary system has been characterized by substantial exchange rate variations.Exchange rate overshooting (discussed in chapter 22) has occurred.Exchange rate variability has had real effects: nominal rate fluctuations have not matched PPP exchange rate variations, so real exchan

29、ge rates have fluctuated.Experience Under the Current International Monetary System4.The system hasnt insulated countries from foreign shocks as well as was hoped; perhaps because of intervention.Countries have increased their holdings of international reserves; a flexible exchange rate system was s

30、upposed to allow reduction.Particular concern: some central banks (esp. Chinas) now have enormous dollar reserves selling these would cause a dramatic decrease in the dollars value.Experience Under the Current International Monetary System6.There has not been an increase in inflation because of grea

31、ter flexibility of exchange rates (the “vicious circle” hypothesis of chapter 28 hasnt come to pass).7.More flexible exchange rates do not seem to have caused the volume of trade to shrink.Experience Under the Current International Monetary SystemThe Asian financial crisis of 1997 was fueled byspecu

32、lative overinvestment,inadequate institutional development and oversight, andease of capital flight from one country to another.The Global Financial Crisis and Recession of 2007-?The worlds worst recession since WWII began in 2007 with the onset of the collapse of the U.S. subprime market.The downtu

33、rn quickly spread to other countries.In response, governments have used expansionary fiscal and monetary policy; IMF has attempted to help developing countries.The Global Financial Crisis and Recession of 2007-presentWhos to blame? Fingers have been pointed variously atFinancial institutions that to

34、ok dangerous risks.Regulatory agencies that allowed reckless behavior.Large global imbalances, such as the U.S.s large and persistent current account deficits and Chinas surpluses.The Global Financial Crisis and Recession of 2007-presentProblems persist:Fiscal austerity would improve the debt situat

35、ions of countries that are struggling, but would further slow economic activity and increase unemployment.Fiscal expansion to decrease unemployment would increase debt levels and might make the EMU unsustainable in its present form.Suggestions for Reform of the International Monetary SystemA return

36、to the gold standardLong-standing BOP imbalances would not occur, and exchange rate risks would be reduced.However, this system emphasizes BOP equilibrium over internal goals such as full employment.A world central bankExtreme form: something like the EMUWhich country would give up its sovereignty?S

37、uggestions for Reform of the International Monetary SystemThe target zone proposalMajor countries would negotiate targets for real effective exchange rates; each country would commit to maintaining this value within a range around the target.It can be difficult to manage real exchange rates, and some argue that such a system would interfere with efficient resource allocation.Suggestions for Reform of the International Monetary SystemControls on capital flowsIf speculative