International Money and Finance

by Melvin, Michael

• ISBN13: 9780321050519
• ISBN10: 0321050517
• Edition: 6th
• Format: Hardcover
• Copyright: 1999-07-01
• Publisher: Addison-Wesley

Summary

Melvin's International Money and Finance offers a concise survey of international finance. The basics of the foreign exchange market and the balance of payments are presented, along with accessible discussions of the most recent research findings related to exchange rate determination. Topics range from the nitty-gritty of financing international trade to intuitive discussions of overshooting exchange rates and currency substitution. The Sixth Edition has been written in the same spirit as the first five-to provide a concise survey of international money and finance suitable for undergraduate and graduate economics courses, and MBA classes.

Table of Contents

Preface	xi	(2)
To the Student	xiii
1 The Foreign Exchange Market	1	(24)
Spot Rates	1	(5)
Arbitrage	6	(3)
The Intradaily Activity	9	(4)
Central Bank Intervention	13	(2)
Black Markets and Parallel Markets	15	(2)
Foreign Exchange Trading Volume	17	(1)
Summary	18	(1)
Exercises	19	(1)
References	19	(1)
Appendix 1A: Exchange Rate Indexes	19	(3)
Appendix 1B: The Top Foreign Exchange Dealers	22	(3)
2 The Balance of Payments	25	(18)
Current Account	28	(2)
Financing the Current Account	30	(3)
Additional Summary Measures	33	(1)
Transactions Classification	34	(3)
Balance of Payments Equilibrium and Adjustment	37	(4)
Summary	41	(1)
Exercises	42	(1)
References	42	(1)
3 Past and Present International Monetary Arrangements	43	(24)
The Gold Standard: 1880 to 1914	43	(2)
The Interwar Period: 1918 to 1939	45	(1)
The Gold Exchange Standard: 1944 to 1970	46	(2)
The Transition Years: 1971 to 1973	48	(1)
Floating Exchange Rates: 1973 to the Present	49	(1)
The Choice of an Exchange Rate System	50	(5)
Optimum Currency Areas and the EMS	55	(2)
The Euro	57	(1)
Currency Boards	57	(2)
International Reserve Currencies	59	(4)
Composite Reserve Currencies	63	(1)
Multiple Exchange Rates	64	(1)
Summary	65	(1)
Exercises	65	(1)
References	66	(1)
4 Forward-Looking Market Instruments	67	(18)
Forward Rates	70	(1)
Swaps	71	(3)
Futures	74	(3)
Options	77	(4)
Recent Practices	81	(2)
Summary	83	(1)
Exercises	83	(1)
References	84	(1)
5 Exchange Rates, Interest Rates, and Interest Parity	85	(14)
Interest Parity	85	(4)
Interest Rates and Inflation	89	(1)
Exchange Rates, Interest Rates, and Inflation	90	(1)
Expected Exchange Rates and the Term Structure of Interest Rates	91	(3)
Summary	94	(1)
Exercises	94	(1)
References	95	(1)
Appendix: What Are Logarithms, and Why Are They Used in Financial Research?	96	(1)
What Are Logarithms?	96	(1)
Why Use Logarithms in Financial Research?	97	(1)
References	98	(1)
6 Foreign Exchange Risk and Forecasting	99	(14)
Types of Foreign Exchange Risk	99	(4)
Foreign Exchange Risk Premium	103	(4)
Market Efficiency	107	(2)
Foreign Exchange Forecasting	109	(2)
Summary	111	(1)
Exercises	111	(1)
References	112	(1)
7 International Investment and Capital Flows	113	(14)
Portfolio Diversification	113	(4)
Home Bias in International Investment	117	(2)
International Investment Opportunities	119	(1)
Direct Foreign Investment	120	(2)
Capital Flight	122	(1)
Capital Inflow Issues	123	(2)
Summary	125	(1)
Exercises	125	(1)
References	126	(1)
8 Prices and Exchange Rates: Purchasing Power Parity	127	(18)
Absolute Purchasing Power Parity	128	(6)
Relative Purchasing Power Parity	134	(1)
Time, Inflation, and PPP	135	(1)
Deviations from PPP	136	(4)
Overvalued and Undervalued Currencies	140	(3)
Summary	143	(1)
Exercises	144	(1)
References	144	(1)
9 Determinants of the Balance of Trade and Payments	145	(24)
Elasticities Approach to the Balance of Trade	145	(4)
Elasticities and J Curves	149	(1)
Currency Contract Period	150	(3)
Pass-Through Analysis	153	(4)
The Evidence from Devaluations	157	(1)
Absorption Approach to the Balance of Trade	158	(1)
Monetary Approach to the Balance of Payments	159	(8)
Summary	167	(1)
Exercises	168	(1)
References	168	(1)
10 Exchange Rate Determination	169	(20)
The Asset Approach	170	(3)
Sterilization	173	(2)
Sterilized Intervention	175	(1)
Exchange Rates and the Trade Balance	176	(2)
Overshooting Exchange Rates	178	(3)
Equilibrium Approach	181	(1)
Currency Substitution	182	(2)
The Role of News	184	(1)
Foreign Exchange Market Microstructure	185	(2)
Summary	187	(1)
Exercises	188	(1)
References	188	(1)
11 Import and Export Financing	189	(14)
Institutions	189	(4)
Executing Transactions	193	(2)
Letters of Credit	195	(3)
Bankers' Acceptances	198	(1)
An Example of Trade Financing	199	(1)
Summary	200	(1)
Exercises	201	(1)
References	201	(2)
12 Financial Management of the Multinational Firm	203	(14)
Financial Control	203	(2)
Cash Management	205	(3)
Intrafirm Transfers	208	(3)
Capital Budgeting	211	(2)
Summary	213	(1)
Exercises	214	(1)
References	214	(1)
Appendix: Present Value	215	(2)
13 The International Money Market	217	(22)
Origins of Offshore Banking	218	(3)
International Banking Facilities	221	(2)
Offshore Banking Practices	223	(4)
International Lending and Crisis	227	(3)
IMF Conditionality	230	(3)
Country Risk Analysis	233	(2)
Summary	235	(1)
Exercises	235	(3)
References	238	(1)
14 Macroeconomic Policy in the Open Economy	239	(16)
Internal and External Macroeconomic Equilibrium	240	(1)
The IS Curve	240	(3)
The LM Curve	243	(2)
The BP Curve	245	(1)
Equilibrium	246	(1)
Monetary Policy Under Fixed Exchange Rates	246	(2)
Fiscal Policy Under Fixed Exchange Rates	248	(1)
Monetary Policy Under Floating Exchange Rates	248	(2)
Fiscal Policy Under Floating Exchange Rates	250	(1)
International Policy Coordination	251	(2)
Summary	253	(1)
Exercises	253	(1)
References	253	(2)
Glossary	255	(8)
Index	263