ECSENOMICS Chapter 29 Exchange Rates and the International Financial System McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 29 Exchange Rates and the International Financial System
ECSENOMICS Growing U.S. Openness T213 Figure 29-1 Imports/GDP 12 195019551960196519701975 19801985199019952000 McGraw-Hilllrwin Source: U.S. Department of Commerce
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. T-213 Figure 29-1 Source: U.S. Department of Commerce Growing U.S. Openness
ECSENOMICS Openness of Different Economies. 1997 T214 Figure 29-2 49s Brazil Mexico Netherlands RU Germany Canada Hong Kon McGraw-Hilllrwin Source:WorldBank,www.worldbank.org/data/wdil
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Openness of Different Economies, 1997 T-214 Figure 29-2 Source: World Bank, www.worldbank.org/data/wdi/
ECSENOMICS Exchange-Rate Determination T215 Figure 29-3 D Foreign exchange(dollars) McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Exchange-Rate Determination T-215 Figure 29-3
ECSENOMICS A Decrease in Demand for Dollars Leads to Dollar Depreciation T216 Figure 29-4 *品55 100 E 75 D D 0 Foreign exchange(dollars) McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. A Decrease in Demand for Dollars Leads to Dollar Depreciation T-216 Figure 29-4
ECSENOMICS Monetary Tightening Increases Demand for t Dollars and Produces Dollar Appreciation T-217 Figure 29-5 9100 Foreign exchange(dollars) McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Monetary Tightening Increases Demand for Dollars and Produces Dollar Appreciation T-217 Figure 29-5
ECSENOMICS PPP Calculations Change the Relative size of Nations. 1998 T218 Figure 29-6 Y United States India Germany france 1.000 Indonesia· RussIa United Kingdom =w Malaysia./Hong Kong 100 Nigeria 10 Lu 1.000 10.000 GDP(US S, billions, market exchange rates) McGraw-Hilllrwin Source: World Bank. Note that outputs are shown on a ratio scale
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. PPP Calculations Change the Relative Size of Nations, 1998 T-218 Figure 29-6 Source: World Bank. Note that outputs are shown on a ratio scale
ECSENOMICS Hume's Four-Pronged International Adjustment Mechanism T219 Figure 29-7 America has balance-of- payments deficit America loses gold Britain gains gold American money British money supply declines supply increases Prices decline in America British prices rise Step 1: Deel Step 2: Rise in Step 3: Rise Step 4: Decline in in American exports of British exports ports of goods American goods imports of goods of goods American balance-of. British balance-of payments equilibrium payments equilibrium restored restored McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Hume’s Four-Pronged International Adjustment Mechanism T-219 Figure 29-7
ECSENOMICS Governments Intervene to Defend Fixed Exchange Rate T220 Figure 29-8 1.5 D S C 起合1.0 0.5 Foreign exchange(pesos) McGraw-Hilllrwin Copyright C 2001 The McGraw-Hill Companies, Inc. All rights reserved
McGraw-Hill/Irwin Copyright © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Governments Intervene to Defend Fixed Exchange Rate T-220 Figure 29-8