Chapter :Openness in Goods and financial market 96-1: Openness in Goods Market 6-2: Openness in Financial Market 6-3: Conclusions and a look ahead
Chapter 6:Openness in Goods and Financial Market 6-1:Openness in Goods Market 6-2:Openness in Financial Market 6-3:Conclusions and a Look ahead
6-1:Openness in Goods Market The choice between domestic and Foreign Goods e Nominal Exchange Rates ● Real exchange rates
6-1:Openness in Goods Market The Choice between Domestic and Foreign Goods ⚫ Nominal Exchange Rates ⚫ Real Exchange Rates
6-1BOpenness in Goods Market Table 18-1: Ratios of exports to gdp for Selected oEcD Countries. 1997 Country Export Ratio/ Country Export Ratio United States 12% Switzerland 40% Japan 10% Austria 38% Germany 23% Belgium 73% United Kingdom 29% Luxembourg 91%
6-1:Openness in Goods Market Table 18-1:Ratios of Exports to GDP for Selected OECD Countries,1997 Country Export Ratio Country Export Ratio United States 12% Switzerland 40% Japan 10% Austria 38% Germany 23% Belgium 73% United Kingdom 29% Luxembourg 91%
Appendix: The Sum of Trade and Proportion in GDP Year SUM Proportion Year SUMProportion (RMB)In GDP(%) RMB) In GDP(%) 19783550 98 199523499.9402 1980570.0 12.6 1996241338356 198520667 23.1 1997269672 36.2 199055601 30.0 1998268577 34.3 199172258334 1999268963 32.8 199291196342 2000353686 40.1 199311271.0325 200138021.3 396 199420381943.6 200246309945.2
Appendix: The Sum of Trade and Proportion in GDP Year SUM (RMB) Proportion In GDP(%) Year SUM (RMB) Proportion In GDP(%) 1978 355.0 9.8 1995 23499.9 40.2 1980 570.0 12.6 1996 24133.8 35.6 1985 2066.7 23.1 1997 26967.2 36.2 1990 5560.1 30.0 1998 26857.7 34.3 1991 7225.8 33.4 1999 26896.3 32.8 1992 9119.6 34.2 2000 35368.6 40.1 1993 11271.0 32.5 2001 38021.3 39.6 1994 20381.9 43.6 2002 46309.9 45.2
Nominal Exchange Rates From the point of view of United states Looking at Germany Nominal exchange rate E Price of dm in terms of dollars Appreciation of the dollar Price of dollars in dm increases equivalently: price of DM in dollars decreases equivalently EXchange rate decreases: Ey Depreciation of the dollar Price of dollars in DM decreases equivalently price of DM in dollars increases equivalently -EXchange fate inereases: Ei
Nominal Exchange Rates From the Point of View of United States Looking at Germany Nominal exchange rate E Price of DM in terms of dollars Appreciation of the dollar Price of dollars in DM increases equivalently: price of DM in dollars decreases equivalently: Exchange rate decreases:E↓ Depreciation of the dollar Price of dollars in DM decreases equivalently: price of DM in dollars increases equivalently: Exchange rate increases:E↑
Real Exchange Rate Price of german Price of german goods in DM goods in dollars Px EPR Real Exchange rate 8=EPM/P Price ofu.s goods In dollars P
Real Exchange Rate Price of German goods in DM P* Price of German goods in dollars EP* Price of U.S goods in dollars P Real Exchange rate ε =EP*/P
Figure:The Country Composition of Us Merchandise Trade.1998 Exports to Imports from Countries SBillions Percent $Billions Percent Canada 156 23 77 19 Western Europe 159 24 193 21 Japan 57 8 121 13 Mexico 78 12 95 11 Asia 126 19 247 27 OPEC 15 19 Others 80 11 67 Total 671 100 919 100
Figure:The Country Composition of U.S. Merchandise Trade,1998 Exports to Imports from Countries $Billions Percent $Billions Percent Canada 156 23 177 19 Western Europe 159 24 193 21 Japan 57 8 121 13 Mexico 78 12 95 11 Asia 126 19 247 27 OPEC 15 2 19 2 Others 80 11 67 7 Total 671 100 919 100
From the point of view of United Stated Looking at Germany Real exchange rate a Price of german goods in terms ofU.s goods Real appreciation Price of U.S. goods in terms of Germany goods increases Equivalently Price of German goods in terms of U.S. goods decreases EauiⅤ alently Real exchange rate decreases: a t Real depreciation Price ofU. s goods in terms of Germany goods decreases Equivalently Price of german goods in terms ofu.s goods increases EauiⅤ alent y Real exchange rate increases: &+
From the point of view of United Stated Looking at Germany Real exchange rate ε Price of German goods in terms of U.S.goods Real appreciation Price of U.S.goods in terms of Germany goods increases Equivalently: Price of German goods in terms of U.S. goods decreases Equivalently: Real exchange rate decreases: ε Real depreciation Price of U.S. goods in terms of Germany goods decreases Equivalently: Price of German goods in terms of U.S. goods increases Equivalently: Real exchange rate increases: ε
6-2:Openness in Financial Market The Balance of Payments The Current Account The Capital account e The choice between domestic and Foreign Assets
6-2:Openness in Financial Market The Balance of Payments ⚫ The Current Account ⚫ The Capital Account The Choice between Domestic and Foreign Assets
Figure The U.s. Balance of Payments, 1998 in Billions of U.s. Dollars Current Account Exports 931 Imports 1100 Trade balance(deficit=(1) 169 Investment income received 242 Investment income paid 265 Net investment income(2) -23 Net transfers received(3) Current account balance( deficit=-)(1)(2)+ ( 3) 233 Capital Account Increase in foreign holdings of U.sassets 542 Increase in U.s. holdings of foreign assets 305 Net increase in foreign holdings(net capital flows to the u.s. 237 Statistical discrepancy 4
Figure The U.S. Balance of Payments,1998,in Billions of U.S. Dollars Current Account Exports 931 Imports 1100 Trade balance(deficit= -) (1) -169 Investment income received 242 Investment income paid 265 Net investment income (2) -23 Net transfers received (3) -41 Current account balance (deficit = -) (1)+(2)+(3) -233 Capital Account Increase in foreign holdings of U.S. assets 542 Increase in U.S. holdings of foreign assets 305 Net increase in foreign holdings/(net capital flows to the U.S. 237 Statistical discrepancy 4
