Showing papers on "Exchange rate published in 1969"

International Financial Management

Abstract: Part One: Foundations of International Financial Management Chapter 1: Globalization and the Multinational Firm Chapter 2: International Monetary System Chapter 3: Balance of Payments Chapter 4: Corporate Governance Around the World Part Two: The Foreign Exchange Market, Exchange Rate Determination, and Currency Derivatives Chapter 5: The Market for Foreign Exchange Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates Chapter 7: Futures and Options on Foreign Exchange Part Three: Foreign Exchange Exposure and Management Chapter 8: Management of Transaction Exposure Chapter 9: Management of Economic Exposure Chapter 10: Management of Translation Exposure Part Four: World Financial Markets and Institutions Chapter 11: International Banking and Money Market Chapter 12: International Bond Market Chapter 13: International Equity Markets Chapter 14: Interest Rate and Currency Swaps Chapter 15: International Portfolio Investment Part Five: Financial Management of the Multinational Firm Chapter 16: Foreign Direct Investment and Cross-Border Acquisitions Chapter 17: International Capital Structure and the Cost of Capital Chapter 18: International Capital Budgeting Chapter 19: Multinational Cash Management Chapter 20: International Trade Finance Chapter 21: International Tax Environment and Transfer Pricing

The Accuracy of International Trade Data: The Case of Southeast Asian Countries

Abstract: Among available economic data of less developed countries, foreign trade statistics are known to be most reliable and are used extensively. This paper, concentrating on Southeast Asian countries, examines the extent and variation of discrepancy in export and import recordings of their own and of their trading partners. The ratio of corresponding trade records exhibit varying heights and irregular patterns suggesting a larger degree of inaccuracy than generally assumed. Inter-Asian trade of Southeast Asian countries show a greater discrepancy than that of their trade with developed countries, and the trade ratio variance of the former is significantly larger than that of the latter at the 5% level. The rank coefficient of correlation between the level of discrepancy and the absolute size of trade value is found to be insignificant for most countries. Also the adjustment of trade figures by exchange rate overvaluation does not narrow the inconsistency in the bilateral trade recordings. The recordin...

International Capital Movements and Monetary Equilibrium: Reply

Abstract: In his conmment on my recent article, H. Robert Heller has focused attention on an important issue-what is the effect on the level of wealth of a sale of capital assets in return for foreign exchange reserves, or more generally, of an increase in the stock of foreign exchange reserves from whatever source? In my paper I assumed for analytical convenience that foreign exchange reserves held by the government are not regarded by individuals in the community as part of their wealth, and then qualified this statement in a footnote, arguing in effect that an accumulation of foreign exchange reserves in exchange for capital assets would reduce wealth, but not by the full amount of the reduction in capital assets. Even if they yield no return in the form of interest such foreign exchange reserves are wealth in the sense that they can be cashed in for real goods or capital assets. If they bear interest, so much the better. This is consistent with the notion, common among trade economists, that surplus countries are giving subsidized loans to deficit countries. The element of subsidy or wealth transfer arises because the reserves are being held in a different form than individuals would choose to hold them, that is, if we were to let the exchange rate float and hand over the stock of foreign exchange reserves on some basis to the members of the community, they would convert them into capital assets at least in part. In his comment, Heller appears to be making three points. First, he argues that government held foreign exchange reserves have a liquidity value in that they enable the authorities to finance balance of payments deficits without undertaking costly adjustments of the domestic economy. Second, he points out that the fraction of the total national wealth portfolio that should be held in the form of foreign exchange reserves is determined by the condition that the marginal liquidity return noted above be equal to the marginal rate of return obtainable on other assets. Third, he concludes that the financing of a balance-of-payments disequilibrium by an accumulation or depletion of foreign exchange reserves involves no transfer of wealth but merely an exchange of assets. In order to respond effectively to these points, I find it useful to develop more fully the theory of the optimal stock of foreign exchange reserves. It is possible, as Heller's argument implies, that some or all members of the community may obtain utility from having some degree of exchange rigidity and some government held inventory of foreign exchange reserves which would provide the liquidity necessary to maintain the desired degree of inflexibility of the exchange rate without requiring inflation or deflation of the domestic economy. Since the raison d'etre of any government policy is that individuals benefit, the analysis must begin at the individual level. Because individuals differ in their economic circumstances and their attitudes toward risk, they will be affected differently by exchange and domestic income and price variability and the degree of uncertainty with respect to the ability of the government to avoid them. The optimal government held stock of foreign exchange reserves will therefore be different for different individuals. In Figure 1, the vertical axis measures the net increment to wealth resulting from the government held inventory of foreign exchange reserves while the horizontal axis measures the mean or permanent size of that inventory. It is the average or permanent stock of foreign exchange reserves rather than the current stock which is relevant, since the function of the stock of reserves is * Professor of economics, University of Toronto.

The "Exportable Surplus" Approach to Foreign Trade in Underdeveloped Countries

Abstract: Many models of trade and development are based on the assumption that an underdeveloped country's exports are determined exogenouslyfor example, in accordance with the growth of world demand-or in any case independently of the country's own policy actions.' This assumption may be useful for many analytical and policy purposes, but it is important to point out that in some cases, other models of export determination may be relevant. For instance, a study of Brazil's export stagnation during the postwar period revealed that a major cause lay in government policy discriminating against exports of products other than coffee.2 This was done through overvaluation of the export exchange rate for such products, and when this was not enough to deter exportation, through the imposition of export quotas and outright prohibitions. As a result of these policies, the proportion of primary production that was exported rather than consumed domestically dropped sharply. The quantum decline in exports of these products accounted for the failure of aggregate Brazilian exports to increase much during this period. This is not the familiar case in which an underdeveloped country attempts to restrict supply of a commodity in which it has a degree of oligopolistic power in the world market, and indeed the policy applied only to products in which Brazil clearly had no market power. Rather, government discrimination against exports stemmed from the policy makers' special "exportable surplus" attitude to trade.3 Following this approach, a country exports only the "surplus" which is "left over" after the domestic market has been "adequately" supplied. Domestic demand takes priority, however, and must be supplied even if internal prices are lower than world market prices. Such an "exportable surplus" approach leading to discrimination against exports has apparently not been limited to Brazil.4 A similar mentality seems to have influenced export policy in other less developed countries during the postwar period, for example, in Argentina, Colombia, and India, and for particular commodities, such as rice, in Egypt and

Canadian Economic Policy and the Impact of International Capital Flows

Abstract: The object of this study is to investigate the effects that complete and formal integration of the Canadian with the American capital market would have on the Canadian economy. It is based largely on recent trade statistics, particularly those of the period when the exchange rate floated. In summary, the short- and long-run effects could both be beneficial to Canada. This study is a convenient summary of a longer work by the same authors to be published in 1970.

The problem of agriculture in a european economic union

Abstract: A revaluation of the German Mark has been hindered by the effects that this would have on German farm prices, given the E.E.C. agricultural policy. The article therefore examines the implications of (a) a common agricultural price level, and (b) fixed or adjustable exchange rates within a customs union such as the E.E.C. It concludes that a change in relative price levels between countries couldbe tackled by means of exchange rate changes, while retaining a common agricultural price level; but even with adjustable exchange rates, a common price level may give rise to diBculties unless agricultural productivity in the member countries grows in a particular way. It finally suggests that a wider European economic union would require niorejexible arrangements than those at present in force in the E. E.C.

Internationale monetaire problemen

Abstract: The paper is in the nature of an interim-report on progress with respect to reform of the international monetary system since three years ago. Only under the heading of haphazard creation of international reserves has some progress been made (S.D.R.'s). Also, there has been a realignment of currency values. However, the root of the difficulties remains the lack of international co-ordination of domestic policies with a view to external equilibrium. With recent exchange rate adjustments there is a danger that plans for reform and greater flexibility of rates will be shelved.