目　录

第三版前言

第二版前言

前　　言

Chapter 1　Balance of Payments

1.1　International transactions: the balance of payments

The current account

The capital account

Change in reserves

Counterpart items

Net errors and omissions

1.2　Balance of payments surplus and deficit

The trade account and current account

The basic balance

The official settlement balance

1.3　Economic forces and the balance of payments

Conditions for equilibrium

Economic forces

Process of adjustment

Exercises

Chapter 2　Theories of Balance of Payments

2.1　The elasticity approach to the balance of payments

2.2　The absorption approach to the balance of payments

2.3　The monetary approach to the balance of payments

Exercises

Chapter 3　Macroeconomic Policy in an Open Economy

3.1　The problem of internal and external balance

3.2　The Mundell-Fleming model

Internal and external balance under fixed exchange rates

Internal and external balance under floating exchange rates

A small open economy with perfect capital mobility

The principle of effective market classification

Limitations of the Mundell-Fleming model

3.3　Conclusions

Exercises

Chapter 4　Fixed, Floating and Managed Exchange Rates

4.1　Definitions and types of the exchange rate

The spot and forward exchange rates

Nominal, real and effective exchange rates

Fixed, floating and managed exchange rates

4.2　The case for fixed exchange rates

Fixed exchange rates promotes international trade and investment

Fixed exchange rates provide discipline for macroeconomic policies

Fixed exchange rates promote international cooperation

Speculation under floating rates is likely to be destabilizing

4.3　The case for floating exchange rates

Floating exchange rates ensure balance-of-payments equilibrium

Floating exchange rates ensure monetary autonomy

Floating exchange rates insulate economies

Floating exchange rates promote economic stability

Private speculation is stabilizing

4.4　Managed floating

Authorities might be able to produce a more appropriate exchange rate

Intervention needed to mitigate costs of exchange-rate overshooting

Intervention to smooth the economic adjustment process

4.5　Conclusions

Exercises

Chapter 5　Models of Exchange-rate Determination

5.1　Purchasing power parity

The law of one price

Absolute and relative PPP

The empirical evidence

Reasons for divergence from short-term PPP

5.2　Covered interest parity

Background

The CIP condition

The mechanics of covered arbitrage

Covered arbitrage with bid-offer spreads

5.3　Market efficiency, uncovered interest parity and real interest parity

The concept of market efficiency

Spot and forward market efficiency

Uncovered interest parity

The mechanics of uncovered interest arbitrage

Real interest parity: the concept of the real interest rate

5.4　Foreign exchange risk management

Hedging with forward contracts

Hedging with futures contracts on organized markets

Other hedging instruments

Exercises

Chapter 6　The Foreign Exchange Market

6.1　The basics of the foreign exchange market

Definitions and characteristics of the foreign exchange market

Market participants

Settlement procedures

Fund transfers through clearing houses

6.2　Mechanics of the foreign exchange market

The spot exchange market

The forward foreign exchange market

Exercises

Chapter 7　Currency Futures, Options and Swaps

7.1　Introduction

Market structure

7.2　Currency futures

Futures markets-role of the exchange

Contract speculations

Buying, selling, and closing out a futures position

7.3　Currency options

Option market quotations

Factors controlling option premiums

Speculating with call options or put options

Comparison of options and futures contracts

Options on futures

7.4　Currency and interest swaps

Currency swaps

Interest rate swaps

Cross-currency interest rate swaps

Exercises

Chapter 8　International Lending and Financial Crises

8.1　International lending to developing countries

The surge in international lending, 1974-1982

The debt crises of 1982

The resurgence of capital flows in the 1990s

8.2　Financial crises: what can and does go wrong

Waves of over-lending and over-borrowing

Exogenous international shocks

Exchange rate risk

Fickle international short-term lending

Global contagion

8.3　Resolving financial crises

Rescue packages

Debt restructuring

8.4　The frequency of financial crises

Exercises

Chapter 9　The International Monetary System

9.1　History of the international monetary system

The gold standard, 1876-1913

The interwar years and World War II, 1914-1944

Bretton Woods and the International Monetary Fund, 1944

Eurocurrencies

Eurocurrency interest rates: LIBOR

Fixed exchange rates, 1945-1973

An eclectic currency arrangement, 1973-present

9.2　Contemporary currency regimes

IMF’s exchange rate regime classifications

Fixed versus flexible exchange rates

Attributes of the “ideal” currency

9.3　Emerging markets and regime choices

Currency boards

Dollarization

9.4　The birth of a European currency: the euro

The Maastricht Treaty

Why monetary unification?

The launch of the euro

Achieving monetary unification

9.5　Exchange rate regimes: what lies ahead?

Exercises

Chapter 10　International Banking and the Eurocurrency Market

10.1　The Eurocurrency market

Market characteristics

Origins and development

Eurocurrency interest rates

Quotes and spreads

10.2　International funds transfer and credit expansion through the Eurocurrency system

Money expansion through the Eurocurrency markets

10.3　The Eurocurrency market and balance of payments disequilibrium

Financing balance of payments disequilibrium through the Eurocurrency markets

The Eurocurrency market and exchange rate adjustment

10.4　International banking: structure and instruments

Organization of the international banking system

Correspondent banking

Representative offices

Foreign branches and subsidiaries

An overview of the system

Instruments of Eurobank financing

Exercises

Chapter 11　Foreign Direct Investment and International Capital Budgeting

11.1　Background

Reasons for interest in FDI

History of FDI

11.2　Approaches to international business

11.3　Theories of FDI

The differential rates of return hypothesis

The diversification hypothesis

The output and market size hypothesis

The industrial organization hypothesis

The internalization hypothesis

The location hypothesis

The eclectic theory

The product life cycle hypothesis

The oligopoly reaction hypothesis

The internal financing hypothesis

Political instability and political risk

Tax policies

Government regulations

Strategic and long-term factors

11.4　More about taxation

Types of taxes

The avoidance of double taxation

Tax havens

11.5　Foreign direct investment and country risk

Using country risk analysis in capital budgeting

11.6　Transfer pricing

Tax considerations

Global regulation

Management incentives and performance evaluation

Fund positioning

Marketing considerations and competition

Risk and uncertainty

Government policies

The interests of joint venture partners

The negotiating power of the subsidiary

Exercises

Chapter 12　Digital Currency and International Finance

12.1　Digital currency

A brief history of digital currency

Facts of digital currency

12.2　Virtual currency

Digital & virtual currency

12.3　Cryptocurrency & Blockchain

Advantages & disadvantages of cryptocurrency

12.4　Bitcoin

12.5　Libra

How will Libra work?

So Libra is a cryptocurrency?

Why does Libra need to be centralized?

Bitcoin is really volatile, isn’t that a problem?

What do central banks think about Libra?

12.6　Digital Currency Electronic Payment

Why is China coming up with a digital currency?

DCEP will operate on a two-tiered system

What is the difference between DCEP, Libra, Bitcoin and Cash?

12.7　Federal Reserve’s view towards digital currency

Why the Fed is considering a cash-backed cryptocurrency?

12.8　Prospects of digital currency in international finance

Exercises

Key to Exercises

Chapter 1　Balance of Payment

Chapter 2　Theories of Balance of Payment

Chapter 3　Macroeconomic Policy in an Open Economy

Chapter 4　Fixed, Floating and Managed Exchange Rates

Chapter 5　Models of Exchange-rate Determination

Chapter 6　The Foreign Exchange Market

Chapter 7　Currency Futures, Options and Swaps

Chapter 8　International Lending and Financial Crises

Chapter 9　The International Monetary System

Chapter 10　International Banking and the Eurocurrency Market

Chapter 11　Foreign Direct Investment and International Capital Budgeting

Chapter 12　Digital Currency and International Finance

Test One

Key to Test One

Test Two

Key to Test Two

References