《国际金融》课件第10章2课时.pptVIP

CHAPTER 10 Floating Exchange Rates and Internal Balance Clean Float and External Balance With a clean float, There is no official intervention The country always has an overall balance of zero. External balance is not an issue. However, the exchange rate can be volatile. Clean Float and External Balance If a country is tending toward a surplus, the currency will appreciate If a country is tending toward a deficit, the currency will depreciate Changes in the exchange rate automatically adjust the overall balance Monetary Policy with Clean Float Monetary Policy gains power under floating exchange rates. Evidence: page 264 Figure 10.1 Figure 10.2 Fiscal Policy with Clean Float A fiscal expansion has two opposing tendencies for the exchange rate value: bids up interest rate, capital flows in, KA improved raises Y, worsens CA Short term effects vs. long run effects Fiscal Policy with Clean Float Responsive capital flows tendency to surplus currency appreciates, CA worsens reduces the policy effect Unresponsive capital flows Tendency to deficit Currency depreciates, CA improved Strengthens the policy effect Figure 10.3 Figure 10.4 Fixed or Floating Exchange Rate? For floating rate regime: Independent monetary policy to adjust internal imbalance Ability to pursue goals that meet its own domestic needs Difficult to defend fixed rate providing free capital flows For fixed rate regime: The variability of floating rates disrupts international transactions. Amanda Hu ? 2008 Copy Right., All Rights Reserved. X↑, M↓ right left Amanda Hu ? 2008 Copy Right., All Rights Reserved. * *