國際金融學課件：Chapter 8 International Banking - reserves, debt, and risk

1、INTERNATIONAL BANKING:RESERVES, DEBT,AND RISK CHAPTER 8 Nature of International ReservesInternational reservesEnable nations to finance disequilibrium in their balance-of-payments positionsDeficit: monetary receipts fall short of monetary paymentsSettled with international reservesEnable nations to

2、sustain temporary balance-of-payments deficitsUntil acceptable adjustment measures can operate to correct the disequilibrium2Demand for International ReservesDemand for international reserves Depends onMonetary value of international transactionsDisequilibrium that can arise in balance-of-payments p

3、ositionsContingent on Speed and strength of the balance-of-payments adjustment mechanismOverall institutional framework of the world economy3Demand for International ReservesDemand for international reserves Exchange-rate flexibilityAutomatic adjustment mechanisms that respond to payments disequilib

4、riumEconomic policies used to bring about payments equilibriumInternational coordination of economic policies4Demand for International ReservesChanges in the degree of exchange-rate flexibility Inversely related to changes in the quantity of international reserves demandedMore rapid and flexible exc

5、hange-rate adjustments requires smaller reserves5When exchange rates are fixed (pegged) by monetary authorities, international reserves are necessary for the financing of payment imbalances and the stabilization of exchange rates. With floating exchange rates, payment imbalances tend to be corrected

6、 by market-induced fluctuations in the exchange rate; the need for exchange-rate stabilization and international reserves then disappears.6The demand for international reserves and exchange-rate flexibilityFIGURE 8.1Demand for International ReservesAutomatic adjustment mechanisms Prices, interest ra

7、tes, incomes, and monetary flows The more efficient each of these adjustment mechanisms isThe smaller and more short-lived market imbalances will be and The fewer reserves will be needed7Demand for International ReservesChoice & effectiveness of government policiesAdopted to correct payments imbalan

8、cesThe greater a nations propensity to apply commercial policies to key sectors Tariffs, quotas, and subsidies The less will be its need for international reserves Assuming that the policies are effective in reducing payments disequilibrium8Demand for International ReservesInternational coordination

9、 of economic policiesGoal of economic cooperation: Reduce the frequency and extent of payment imbalancesReduce the demand for international reservesQuantity demanded of international reservesPositively related to the level of world prices and income9Supply of International ReservesTotal supply of in

10、ternational reservesOwned reservesGold, acceptable foreign currenciesSpecial drawing rights (SDRs)Borrowed reservesLenders:Foreign nations with excess reservesForeign financial institutionsInternational agencies10Foreign Currencies1800s1900s, reserve currenciesThe U.S. dollarThe UK poundTrading nati

11、ons have traditionally been willing to hold them as international reserve assetsSince World War II, the U.S. dollar has been the dominant reserve currency11Foreign CurrenciesThe U.S. dollar as reserve currencyEarly 1950s - a dollar-shortage eraMassive development programs in EuropeExcess demand for

12、the dollars Late 1950s, dollar glutU.S. continued to provide reserves to the world through its payments deficits1960s, liquidity problem1970, creation of SDRs as reserve assets1213International reserves, 2006, all countries (in billions of SDRs*)TABLE 8.1Should SDRs replace the dollar as the worlds

13、reserve currency?The United States dollarMain reserve currency in the world todayMedium of exchange, unit of account, and store of valueWealth in dollar-denominated assets 64% of worlds official foreign exchange reserves86% of daily foreign exchange tradesOther reserve currenciesThe euro, the Britis

14、h pound, Japanese yen14Should SDRs replace the dollar as the worlds reserve currency?Benefits for the U.S.Americans Can purchase products at a marginally cheaper rateCan borrow at lower interest rates for homes and automobilesThe U.S. government Can finance larger deficits longer and at lower intere

15、st ratesCan issue debt (securities) in its own currencyPushing exchange rate risk onto foreign lenders15Should SDRs replace the dollar as the worlds reserve currency?Concerns Substantial dollar depreciationLosing purchasing powerThe U.S. - huge deficits and massive borrowingVolatility of the dollarD

16、estabilizing effect that it can have on international trade and finance16Should SDRs replace the dollar as the worlds reserve currency?2009, China - Special Drawing Right (SDR) to replace the dollarNew world reserve currency Based on a basket of currencies instead of just the dollarSDR: euro, yen, p

17、ound, and dollarExpand to include all major currenciesSDR would be managed by the IMF17Should SDRs replace the dollar as the worlds reserve currency?Benefits of SDRsChina - cushion any depreciation in the dollars exchange valueHelp stabilize the value of Chinas holdings of U.S. Treasury securitiesSu

18、pport aggregate demand in the worldEconomic welfare of the world should not depend on the behavior of a single currency18Should SDRs replace the dollar as the worlds reserve currency?Benefits of SDRsCurrency risk - diversified through a basket reserve unitEnhancing stability and confidence throughou

19、t the worldEquityU.S. can attract the savings of other countries even when the interest rates it pays are very low19Should SDRs replace the dollar as the worlds reserve currency?Potential pitfalls of SDRsSDR is backed by nothing other than the good faith and credit of the IMFWho would determine the

20、“right price” of the SDR?Add another step to each international transactionConvert local currency into SDRs20Should SDRs replace the dollar as the worlds reserve currency?The U.S. and SDRsAmericans would have to pay more for imported goodsInterest rates on both private and governmental debt would in

21、creaseIncreased private cost of borrowingWeaker consumption, decreased investment, and slower growth21GoldGold standard, historicallyInternational means of paymentsUnit of accountViable store of valueOverall acceptabilityMonetary role of gold todayGlittering ghost haunting efforts to reform the inte

22、rnational monetary system22GoldInternational gold standard, 1880 to 1914Values of most national currencies were anchored in goldGold coins circulatedGenerally accepted means of paymentMoney supplyFixed relation to the monetary stock of goldGrowth in monetary goldGrowth in the money supplyAt a rate t

23、hat corresponded to the growth in real national output23GoldU.S. and the gold standard1934, the Gold Reserve ActU.S. government - title to all monetary gold Required citizens to turn in their private holdings to the U.S. TreasuryThe U.S. dollar - devalued in 1934Official price of gold was raised fro

24、m $20.67 to $35 per ounce24GoldGold exchange standard, dollar-gold systemInternational monetary system as formulated by the IMF nationsTo economize on monetary gold stocks as international reservesThe U.S dominant economyProductive capacity and national wealth 25GoldGold exchange standard, dollar-go

25、ld systemThe United StatesAssume the role of world bankerThe dollar - chief reserve currency of the international monetary systemResponsibility for buying and selling gold at a fixed price to foreign official holders of dollarsThe dollar convertible to goldAll other currencies pegged to the dollar26

26、GoldGold exchange standard, dollar-gold system1968, two-tier gold systemOfficial tier - central banks could buy and sell gold for monetary purposes at the official price of $35 per ouncePrivate market - gold as a commodity could be traded at the free-market price27GoldDemonetization of goldAugust 19

27、71, President Richard NixonThe United States was suspending its commitment to buy and sell gold at $35 per ounceU.S. stock of monetary had declined to $11 billionDeteriorating U.S. balance-of-payments positionJanuary 1, 1975The official price of gold was abolished as the unit of account for the inte

28、rnational monetary system28Special Drawing RightsSDRCreated in 1970 by the IMFA new reserve assetObjective: to introduce into the payments mechanism a new type of international moneyIn addition to the dollar and gold29Special Drawing RightsSDR todayLimited use as a reserve assetMain function: unit o

29、f account of the IMF and some other international organizationsSome of the IMFs member nations peg their currency values to the SDRPotential claim on the freely usable currencies of IMF members 30Special Drawing RightsValue of SDR Basket of currenciesThe U.S. dollar, Japanese yen, UK pound, and the

30、euroThe weights of the currencies reflect the amount of exports and imports of these countries during the previous five years31Facilities for Borrowing ReservesIMF drawings The transactions by which the fund makes foreign-currency loans availableDeficit nationsDo not borrow from the fundPurchase wit

31、h their own currency the foreign currency required to help finance deficitsReverse the transaction when the balance-of-payments position improves 32Facilities for Borrowing ReservesGeneral Arrangements to Borrow, 1962G-10 agreed to lend the fund up to a maximum of $6 billionDo not provide a permanen

32、t increase in the supply of world reservesOnce the loans are repaid, world reserves revert back to their original levelsWorld reserves - more flexible and adaptable to the needs of deficit nations33Facilities for Borrowing ReservesSwap arrangementsBilateral agreements between central banksEach gover

33、nment provides for an exchange of currencies to help finance temporary payments disequilibriumThe nation requesting the swapExpected to use the funds to help ease its payments deficits and discourage speculative capital outflowsRepay within a stipulated period of time, normally within 3 to 12 months

34、34International Lending RiskCredit riskFinancialThe probability that part or all of the interest or principal of a loan will not be repaidThe larger the potential for default on a loanThe higher the interest rate that the bank must charge the borrower35International Lending RiskCountry risk - Politi

35、calClosely related to political developments in a countryGovernments views concerning international investments and loansCurrency risk - EconomicAssociated with currency depreciations and appreciations as well as exchange controls36The Problem of International DebtConcern: insufficient international

36、 lending After the oil shocks in 19741975 and 19791980Oil-importing developing nations might not be able to obtain loans to finance trade deficitsResulting from the huge increases in the price of oilAble to borrow dollars from commercial banks1980s, commercial banksPart of an international debt prob

37、lemLent so much to developing nations37The Problem of International DebtDebt service/export ratioIndicator of debt burdenScheduled interest and principal payments as a percentage of export earningsInterest rate that the nation pays on its external debtGrowth in its exports of goods and services38The

38、 Problem of International DebtA nation has debt-servicing problems becauseMay have pursued improper macroeconomic policies that contribute to large balance-of-payments deficitsMay have borrowed excessively or on unfavorable termsMay have been affected by adverse economic events that it could not con

39、trol39The Problem of International DebtOptions for a nation facing debt-servicing difficultiesCease repayments on its debtService its debt at all costsDebt reschedulingObtain emergency loans from the IMFConditionality 40Reducing Bank Exposure to Developing-Nation DebtStability of the international f

40、inancial systemThreatened when developing nations cannot meet their debt obligations to foreign banksBanks - improve their financial positionIncreasing their capital baseSetting aside reserves to cover lossesReducing new loans to debtor nations41Reducing Bank Exposure to Developing-Nation DebtBanks

41、- improve their financial positionLiquidate developing-nation debt Loan sales to other banks in the secondary marketDebt buybackGovernment of the debtor nation buys the loans from the commercial bank at a discountDebt-for-debt swapsBank exchanges its loans for securities issued by the debtor nations government Lower interest rate or discount42Reducing Bank Exposure to Developing-Nation DebtBanks - improve their financial positionDebt/equity swapsCommercial bank sells its loans at a discount to the developing-nation governmen