Chapter 13 Balance of Payment13.1 IntroductionInternational finance: examination of the monetary aspects of international economicsBalance of Payment: a summary statement in which all the transactions of the nation’s residents with the foreigners are recorded during a certain period.Main purpose of BOP: inform the government of the international position of the nation; to help it in its monetary, fiscal and trade policies.BOP traits: The BOP aggregates all the trades into a few categoriesOnly the net balance of each type of international capital flow is includedInternational transaction: Exchange of a good, service or assets between the residents of two nations. Gifts and certain transfers + International TransactionsPeople Concerning BOP: Diplomats, soldiers, tourists and workers belong to motherlandCorporation: motherland/ foreign branches: localInternational institutions: nowhere13.2 BOP Accounting PrinciplesCredit transactions: involve the receipt of payments from foreigners +Exports, unilateral transfers and goods received, capital inflowCapital inflow:an increase in foreign assets in the nation/本国持有外国资产上升a reduction in the nation’s assets abroad/本国在外资产减少Debit transactions: involve the making of payments to the foreigners -Imports, unilateral transfers or gifts paid, capital outflowCapital Outflow:an increase in the nation’s assets abroada reduction in foreign assets in the nationDouble-Entry Bookkeeping: each international transaction is recorded twice, once as a credit and onceas a debit of an equal amount.5 Examples in Textbooks13.3 The International Transactions of the USArounding.The official reserve assets:✓Gold holdings of monetary authorities黄金储备✓Special Drawing Rights特别提款权(paper gold)International reserves created on the books of the IMF and distributed to member nations according toimportance in international trade✓The reserve position in the IMF在IMF的头寸The reserves paid in by the nation on joining the IMF, which the nation can then borrow automatically andwithout questions asked in case of need✓The official foreign currency holdings of monetary authorities外汇储备Statistical Discrepancy: This is required to make the total credits equal to the total debits, as required bydouble-entry bookkeeping.13.4 Accounting Balances and Disequilibrium in International TransactionsAutonomous transactions: transactions in current account + capital accountTake place for business or profit motives and independently of BOPconsiderationsItems above the lineCurrent account:All sales and purchases of currency produced goods and services, investment incomes, and unilateral transfersLink between the nation’s international transactions and its national incomeCurrent account surplus stimulates domestic production and income. Current account deficitdampens domestic production and income.Capital account:The changes in US-owned assets abroad and foreign-owned assets in the US other than official reserve assetsChange in reserves reflects government policy rather than the market force.Accommodating transactions: Transactions in official reserve assetsItems below the lineThe accommodating items form the Official Reserve Account.The balance on the official reserve account is called the Official Settlements Balance.Deficit in the BOP:The excess of debits over credits in the current and capital accountsThe excess of credits over debits in official reserve accountSurplus in the BOP:The excess of debits over credits in official reserve accountThe excess of credits over debits in the current and capital accountsChapter 14 Foreign Exchange Markets and Exchange rates 14.1 IntroductionForeign exchange market : The market in which individuals, firms and banks buy and sell foreigncurrencies or foreign exchange.14.2 Functions of the Foreign Exchange Markets The principle function :The transfer of funds or purchasing power from one nation and currency to anotherThis is usually accomplished by an electronic transfer and increasingly through the Internet .Through the internet, a domestic bank instructs its correspondent bank in a foreign monetary center to pay a special amount of the local currency to a person, firm or an account.外汇供给：外国游客来访 出口 接受外国投资 外汇需求：本国人外出游 进口 对外投资4 levels of transactors or participants :Traditional users The immediate users and suppliers of foreign currencies Commercial bank A cleaning houses between the users and earners of foreign exchange Foreign exchange broker interbank or wholesale marketAs Clearinghouses for surpluses and shortages between the commercial banks Central bank Act as the seller or buyer of last resort when the nation ’s total foreignexchange earnings and expenditures are unequalInternational currency / Vehicle currencySome nations ’ currencies are globally accepted and used as vehicle currencies.The US receives a seignorage benefit when the dollar is used as a vehicle currency.铸币税：国家发行货币吸纳黄金之后，货币贬值，使得持币方财富减少，发行方财富增加。