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Macro Nottes

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Submitted By sdotbell
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Macroeconomics 1/16/13
Key Balance of Payments ( BOP) Concepts * Flows of trade and investment transactions * Residents with * Double entry 1. Debit (-) increase in assets/claims or decrease liability 2. Credit (+) decrease in asset/claim or increase in liability * Trade balance 3. Almost always referring to merchandise, “tangible goods trade * Types of capital 4. Foreign Direct Investment (FDI) (LTC) 5. Portfolio * Stocks * Bonds 6. Other Capital * Bank loans * 3 types of FC Reserves 7. Gold 8. Freely convertible currency * 60% US * 25% euro * 10% Yen 9. SDRS (IMF $) – Paper money * Special drawing rights * Less than 1% in fed reserves * 3 Macro Options (J. F. Kennedy) 10. FX System to adopt 11. Convertibility and currency controls/transactions (US current policy is free/no control) * China restricts amount citizens can invest in foreign investments 12. Trade (protect home market or open export markets)
1/18/13
FX rate change depends on the strength of the currency
Dealing with Euro and European debt crisis
Diversification of portfolio
Some of portfolio in Euro denominated bond.

1/23/13 * Decline of the dollar * Devaluation -> inflation * Expectations of devaluation * Purchasing Power Parity-Long Run * Increase imports price (demand inelastic-not sensitive to price) * Domestic producers increase prices * CPI * Interest rates – short run predictor * Real interest rates * Nominal interest rates with the rate of inflation * Negative real interest rate- * Macro policies 1. FX system 2. No controls 3. Trade 4.

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