国际金融 chapter 2 国际收支平衡表.pptVIP

The monetary approach to the balance of payment Its fundamental basis is that the balance of payments is essentially a monetary phenomenon. Not only is the balance of payments a measurement of monetary flows, but such flows can only be explained by a disequilibrium in the stock, demandfor and supply of money. Three assumptions: a stable money demand function a vertical aggregate schedule purchasing power parity (PPP) The domestic monetary supply in the economy is made up of two components: Ms=D+R （6） Where Ms is the domestic money base, D the domestic bond holdings of the monetary authorities, and R the reserves of foreign currencies valued in the domestic currency. We can now rewrite equation (6) in different form as: dMs=dD+Dr (7) which states that any increase (decrease) in the domestic money supply can come about through either an OMO as represented by dD, or a FXO as represented by dR. The monetary approach to the balance of payment The money supply and reserves Monetarists observe that the overall balance of payments can be thought of as consisting of the current account balance, the capital account balance, and change in the authorities’ reserves. That is: BP=CA+K=dR=0 So that: CA+K=-dR (8) Where CA is the current account balance, K is the capital account balance, and dR is the change in the authorities’ reserves. The monetary approach provides a distinctive and clear analysis of the effects of a devaluation and monetary expansion on the balance of payments. Another significant contribution of themonetary approach is that it provides a rich set of policy recommendations. The money supply and reserves * * Chapter two international balance of payment 北京工业大学耿丹学院吴巍巍 Chapter Objective This chapter serves to introduce the balance of