罗伯特凯伯国际经济学ppts 15ech 14 exchange rate adjustments and the balance of payments

1、Robert CarbaughINTERNATIONAL ECONOMICS, 15E 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom us

2、e.Exchange Rate Adjustments andthe Balance of PaymentsChapter 14 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected web

3、site for classroom use.Chapter Outline (1 of 2) Effects of Exchange Rate Changes on Costs and Prices Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach J-Curve Effect: Time Path of Depreciation Exch

4、ange Rate Pass-Through 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Chapter Outline (2

5、of 2) The Absorption Approach to Currency Depreciation The Monetary Approach to Currency Depreciation 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or

6、otherwise on a password-protected website for classroom use.Effects of Exchange Rate Changes onCosts and Prices (1 of 7) How do exchange-rate fluctuations affect relative costs? It will depend if a firms costs are denominated in localor foreign currency Case 1: No foreign sourcing - all costs are de

7、nominated in dollars If the dollar appreciates by 100%, the U.S. firmsproduction costs also rises by 100% Reduced international competitiveness 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distrib

8、uted with a certain product or service or otherwise on a password-protected website for classroom use.Table 14.1- EffectsAll Costs DollarDenominated. 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license d

9、istributed with a certain product or service or otherwise on a password-protected website for classroom use.Effects of Exchange Rate Changes onCosts and Prices (2 of 7) Case 2. Foreign sourcingsome costs denominated in $ and some costs in Francs If the dollar appreciates by 100%, for the U.S. firm:

10、Production costs in francs increase by 100% for the inputs denominated in dollars Production costs in francs stay the same for the inputs denominated in francs Overall, higher production costs (by less than 100%) Reduced international competitiveness 2015 Cengage Learning. All Rights Reserved. May n

11、ot be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Table 14.2-Effects Some Costs DollarDenominated, Some Franc. 2015 Cengage Learning. All Rig

12、hts Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Effects of Exchange Rate Changeson Costs and Prices (3 of 7) Generalizat

13、ion As franc-denominated costs become a largerportion of Nucors total costs A dollar appreciation (depreciation) leads to A smaller increase (decrease) in the franc cost of Nucor steel A larger decrease (increase) in the dollar cost of Nucor steel compared to the cost changes that occur when all inp

14、ut costs are dollar-denominated 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Effects of

15、 Exchange Rate Changeson Costs and Prices (4 of 7) Changes in relative costs Because of exchange-rate fluctuations Influence relative prices Influence the volume of goods traded among nations 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part,

16、except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Effects of Exchange Rate Changeson Costs and Prices (5 of 7) Dollar appreciation Increasing relative U.S. production costs Raise U.S. export prices in

17、 foreign-currency terms Decrease in the quantity of U.S. goods sold abroad Increase in U.S. imports 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or ot

18、herwise on a password-protected website for classroom use.Effects of Exchange Rate Changeson Costs and Prices (6 of 7) Dollar depreciation Decreasing relative U.S. production costs Lower U.S. export prices in foreign-currency terms Increase in the quantity of U.S. goods sold abroad Decrease in U.S.

19、imports 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Effects of Exchange Rate Changeson

20、 Costs and Prices (7 of 7) Factors influencing the extent by which exchange-rate movements lead to relative price changes among nations U.S. exporters reduce profit margins to maintain competitiveness Perceptions concerning long-term trends in exchange rates - promote price rigidity Product substitu

21、tability Move production offshore 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Cost Cut

22、ting Strategies of Manufacturersin Response to Currency Appreciation(1 of 4) Appreciation of the Yen: Japanese Manufacturers 1990 - 1996, Japanese yen relative to U.S. dollar increased by 40% Japanese firms Establish integrated manufacturing bases in the U.S. and in dollar-linked Asia Use cheaper do

23、llar-denominated parts and materials Purchase cheaper components from around the world Shifted production from commodity-type goods to high-value products 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a lice

24、nse distributed with a certain product or service or otherwise on a password-protected website for classroom use.Figure 14.1 - How HitachiCoped with the Yens Appreciation 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as per

25、mitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Cost Cutting Strategies of Manufacturersin Response to Currency Appreciation(2 of 4) Appreciation of the Yen: Japanese Manufacturers (cont.) Japanese auto industry Cut the

26、 yen prices of their autos Falling unit-profit margins Reduced manufacturing costs Increasing worker productivity Importing materials and parts Outsourcing larger amounts of a vehicles production totransplant factories 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplic

27、ated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Cost Cutting Strategies of Manufacturersin Response to Currency Appreciation(3 of 4) Appreciation of the Dollar: U.S. Manuf

28、acturers 1996-2002, dollar appreciated by 22% Sipco Molding Technologies Partnership with an Austrian company Austrian company - designing and making the tools Sipco simply resold them 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except

29、for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Cost Cutting Strategies of Manufacturersin Response to Currency Appreciation(4 of 4) Appreciation of the Dollar: U.S. Manufacturers (cont.) American Feed Co.

30、 - pact with a Spanish company Divvying up the work to keep both factories operating (U.S. and Spain) Benefits of having a European production base Without having to take on the risks of building its own factory there Redesigned: more efficient and less expensive to build 2015 Cengage Learning. All

31、Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Will Currency Depreciation Reduce aTrade Deficit? The Elasticity Appr

32、oach(1 of 5) Currency depreciation Improve a nations competitiveness Reducing its costs and prices The elasticity approach Relative price effects of depreciation Depreciation works best when demand elasticities are high 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or dupli

33、cated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Will Currency Depreciation Reduce aTrade Deficit? The Elasticity Approach(2 of 5) The absorption approach Income effects o

34、f depreciation A decrease in domestic expenditure relative to income must occur for depreciation to promote trade equilibrium The monetary approach Effects depreciation has on the purchasing power of money and the resulting impact on domestic expenditure levels 2015 Cengage Learning. All Rights Rese

35、rved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Will Currency Depreciation Reduce aTrade Deficit? The Elasticity Approach(3 of 5

36、) Elasticity of demand Responsiveness of buyers to changes in price Percentage change in the quantity demanded stemming from a one percent change in price 1, elastic demand 1, inelastic demand =1, unitary elastic demandbe copied, scanned, or duplicated, in whole or in part, except for use as per 201

37、5 Cengage Learning. All Rights Reserved. May notmitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Will Currency Depreciation Reduce aTrade Deficit? The Elasticity Approach(4 of 5) Marshall-Lerner condition Depreciation wi

38、ll improve the trade balance if The currency-depreciating nations demand elasticity for imports Plus the foreign demand elasticity for the nations exports exceeds one Depreciation will worsen the trade balance if The sum of the demand elasticities is less than one The trade balance will be neither h

39、elped nor hurt if the sum of the demand elasticities equals one 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected webs

40、ite for classroom use.Table 14.3 Effect of Pound Depreciation onTrade Balance of UK 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a pas

41、sword-protected website for classroom use.Will Currency Depreciation Reduce aTrade Deficit? The Elasticity Approach(5 of 5) Marshall-Lerner condition (cont.) Simplifying assumptions A nations trade balance is in equilibrium when thedepreciation occurs No change in the sellers prices in their own cur

42、rency Illustrates the price effects of currency depreciation on the home-countrys trade balance 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherw

43、ise on a password-protected website for classroom use.Table 14.4 Long Run Price Elasticities ofDemand for Total Imports & Exports 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a ce

44、rtain product or service or otherwise on a password-protected website for classroom use.J-Curve Effect:Time Path of Depreciation(1 of 3) J-curve effect In the very short term, a currency depreciation will lead to a worsening of a nations trade balance But as time passes, the trade balance will likel

45、y improve Because of lags between changes in relative prices and the quantities of gods traded 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwi

46、se on a password-protected website for classroom use.Figure 14.2 Depreciation Flowchart 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a

47、 password-protected website for classroom use.J-Curve Effect:Time Path of Depreciation(2 of 3) Types of lags Recognition lags Of changing competitive conditions Decision lags In forming new business connections and placing new orders Delivery lags Between the time new orders are placed and their imp

48、act on trade and payment flows is felt 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.J-C

49、urve Effect:Time Path of Depreciation(3 of 3) Types of lags (cont.) Replacement lags In using up inventories and wearing out existing machinery before placing new orders Production lags Involved in increasing the output of commodities for which demand has increased 2015 Cengage Learning. All Rights

50、Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Figure 14.3 Time Path of U.S. Balance ofTradeAppreciation and Depreciation 2

51、015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Exchange Rate Pass-Through(1 of 5) Exchange

52、 rate pass-through relation The extent to which changing currency values lead to changes in import and export prices Buyers have incentives to alter their purchases of foreign goods If the prices of foreign goods change in terms of their domestic currency Exporters willingness to change the prices t

53、hey charge for their goods Measured in terms of the buyers currency 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected

54、website for classroom use.Exchange Rate Pass-Through(2 of 5) Partial Exchange Rate Pass-Through Percentage change in import prices percentage change in the exchange rate Exchange rate pass-through tend to be partial because Invoicing practices Market-share considerations Distribution costs 2015 Ceng

55、age Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Table 14.5 Exchange Rate Pass-Throughinto Import Pr

56、ices after One Year 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Exchange Rate Pass-Through(3 of 5) Invoicing practices Choose the currency to invoice exports Own