International money and finance
By: C. Paul Hallwood and Ronald MacDonald.
Contributors: MacDonald, Ronald.; Hallwood, Paul.
Edition: 2nd ed.
Publisher: B. Blackwell
Published: 1994
Place of publication: Oxford, UK; Cambridge, Mass., USA
Language: eng
Number of pages: 445
Subjects: International finance.
Description: INTERNATIONAL MONEY AND FINANCE 2nd edition

CONTENTS
______________________________________________________

1 INTRODUCTION
    1.1 The internationalization of finance
    1.2 The chapters

2  Some Basic Concepts in International Finance
    2.1 The exchange rate
            Spot and forward rates
            Foreign currency futures and options
    2.2 The balance of payments accounts
            The balance of payments and the money supply
    2.3 Purchasing power parity
            The real exchange rate
    2.4 Floating exchange rates: prospect and retrospect
    2.5 Exchange rate volatility

3 Spot and Forward Exchange Rates: Some more Basic Ideas
     Introduction
     3.1 The elasticities view of the exchange rate
            Unstable exchange rates
            Marshall-Lerner condition
            The 'J' curve
            Devaluation and the terms of trade
     3.2 The forward exchange rate, arbitrage and pure speculation
            Determination of the forward exchange rate by arbitragers and speculators
            Risk premia
            Uncovered interest arbitrage
            Inter-temporal ppp
     3.3 Covered interest rate parity - empirical evidence
     3.4 Uncovered interest rate parity - empirical evidence
     3.5 Real interest rate parity - empirical evidence

4  Income and the Balance of Payments
     4.1 The foreign trade multiplier
     4.2 An early view of economic management: the Swan diagram
     4.3 The assignment problem
     4.4 The absorption approach
            Some policy considerations
     4.5 Twin deficits
     4.6 Foreign repercussions
           Effect of an autonomous increase in US expenditure
     Autonomous switch in US expenditure toward Japanese exports  				                                                          
4.7 Cooperative and 'locomotive' expansion to end a world recession

5 Macroeconomics in an Open Economy
     5.1 The 'base-line' Mundell-Fleming model
           The principle of effective market classification and the assignment problem
     5.2 The large country case
     5.3 Insulation and the MF model
     5.4 Imperfect capital mobility and the MF model
     5.5 Regressive expectations and monetary-fiscal policy
     5.6 The J curve effect and regressive expectations
     5.7 Wealth effects
     5.8 Aggregate suplly, the real balance effect on the exchange rate in the MF model
     Summary and conclusions

6 International Policy Coordination
     Introduction
     6.1 The two country Mundell-Fleming model and macroeconomic independence
           Floating exchange rates
             (i)  Monetary, or beggar-thy-neighbour, policy
             (ii) Fiscal policy             
           Fixed exchange rates
             (i) monetary policy
             (ii) fiscal policy
           Imperfect capital mobility
           Further extensions to the two country model of inter-dependence: the McKibben-Sachs model
     6.2 The potential gains from policy coordination
           The prisoner's dilemma
           The Hamada diagram - targets and instruments revisted
     6.3 Dynamic games, and the sustainability and reputation credibility of international cooperation
     6.4 Some evidence on the potential benefits of coordination
     6.5 Potential impediments to policy coordination and the appropriate form of such coordination

7 Purchasing Power Parity: Theory and Evidence
     Introduction
     7.1 The absolute and relative purchasing power parity concepts
           Law of one price
           Absolute ppp
           Relative ppp
     7.2 The efficient markets view of purchasing power parity
     7.3 Further interpretation of purchasing power parity
     7.4 Some further criticisms of purchasing power parity
            Other criticisms
              (1) Biased productivity: the Balassa-Samuelson thesis
              (2) The demand side and non-traded goods
     7.5 The empirical validity of purchasing power parity
             A comparison of real and nominal exchange rates and tests of the law of one price
      *Regression Based Tests of ppp and the time series properties of the real exchange rate
      Concluding comments

8 Monetary Approach to the Balance of Payments
     Introduction
     8.1 What is so different about the monetary approach?
           Different analytical approaches compared
     8.2 The global monetarist model
             Short-run dynamics
             Devaluation
             Small country assumption
             Domestic credit expansion
           Distribution of the world's money supply
           The policy implications of the MABP
    *8.3 Sterilization and the Reserve Offset Coefficient
           Empirical framework
           Empirical results
           Problems with the empirical implementation of the MABP reduced form equations
   8.4 The international transmission of inflation: some evidence

9 The Monetary View of Exchange Rate Determination
     Introduction
     9.1 The asset approach to the exchange rate
     9.2 The flex-price monetary approach to the exchange rate
     9.3 Introducing expectations
     9.4 Rational speculative bubbles
     9.5 The sticky-price monetary approach
     9.6 Currency substitution
            Currency substitution and the monetary approach
            Currency substitution and monetary targeting
            Currency substitution and inflation: the McKinnon hypothesis

    *9.7 Empirical evidence on the monetary model
    *9.8 More empirical evidence
    *9.10 Empirical tests for the existence of speculative bubbles
    Concluding comments

10  The Portfolio Balance Approach to the Determination of the
    Exchange Rate
     Introduction
            Wither the current account?
     10.1 The portfolio balance model
     10.2 Open market purchase of bonds: monetary policy
           Impact period
           The short-run adjustment period and the move to the new long-run equilibrium
     10.3 An increase in the supply of domestic bonds: fiscal  policy
     10.4 Asset preference shift
    *10.5 Econometric evidence on the portfolio balance approach
     10.6 Summary and concluding comments

11 Spot and Forward Exchange Rates and the Efficient Markets Hypothesis
     Introduction
     11.1 Spot and forward exchange rates
     11.2 The efficient markets hypothesis and the forward market for foreign exchange
           Some basic relationships
    *11.3 Econometric estimation of the EMH
            *Tests of the forward premium as an optimal predictor of the forward exchange rate
    *11.4 A risk premium story to explain why . may not by unity
             A model of the risk premium
    *11.5 Empirically implementing equation 9.24
             i) the CAPM/latent variables approach
             ii) testing the othogonality condition directly
             iii) ARCH models of the risk premium
             The portfolio balance mean variabce approach to risk               
             Miscellaneous risk models
             Concluding comments

12 Expectational Explanations for the Rejection of the Efficient Markets Hypothesis and the 'News"
     12.1 Introduciton
     12.2 Peso effects, rational speculative bubbles and econometric inference
     12.3 Technical analysis and chartism
               Deterministic chaos
    *12.4 Survey data, expectations and risk
     12.5 The news approach to exchange rate modelling
    *12.6 Empirical studies of the news approach
     12.7 The noise-trader paradigm

13  Historical Review of International Monetary Arrangementsœ
     Introduction
     13.1 The international gold standard
             Increase in the home country's gold stock
             Rise in the price of gold
             Capital flows
             Some other adjustment mechanisms under the gold standard
             Anchoring the price level
     13.2 The Bretton Woods system to 1971
             Role of the IMF in the early days
             Heyday of the Bretton Woods system
             The IMF from 1970
             Failure of the 'grand design' (1972©74)
     13.3 The dollar standard
             Early views on the dollar standard
             Another view of the dollar standard
             Reserve creation and the US and world price levels
             The dollar standard 'on the booze'
     13.4 The dollar sandard in an era of volatile exchange rate
                                                    expectations
             Policy implications
             
14 The European Monetary System and Monetary Union 
       Introduction
     14.1 Benefits and costs of a currency area
            Benefits of a common currency
            Costs of a common currency 
     14.2 Origins of the EMS
            Operational details
     14.3 How successful has the EMS been been?
     14.4 The Delors Committee report on monetary union 
            Questions of the transition
     14.5 Target zones
            Target zones - evidence
            Target zones - a modification and some further
                                                     evidence
     14.6 Fiscal federalism
     14.7 More on fiscal policy in a monetary union
             Autonomy
             Loss of the fiscal instrument?
             Discipline
             Coordination


15  International Money and Capital Flows
     15.1 International money and capital flows
     15.2 Eurobanking
             Origin of the eurodollar market
             The eurodollar credit multiplier
             Eurobanks as a debt management system
             The private ECU as a eurocurrency
             Regulation: the Basle Accord
     15.3 International bond markets
             Growth of international bond markets
             ECU bonds
     15.4 Direct foreign investment

16  Developing Countries, Balance of Payments Adjustment and the IMF
     Introduction
     16.1 Developing Country exchange rate arrangements
     16.2 The IMF: its role
     16.3 The IMF's monetary approach to the balance of payments 
     16.4 New structuralist arguments against IMF adjustment policies
             New structuralists versus the IMF: devaluation 
             Empirical evidence
             Adjustment and income distribution

17 The Order of Liberalization in Developing Countries 
     Introduction
     17.1 Distortions and economic performance
     17.2 Unhappy experience with financial liberalization
     17.3 The order of liberalization

18 The Formerly Centrally Planned Economies and the International Financial Economy
     18.1 Introduction
     18.2 Economic reform and the move currency convertibility
     18.3 Catch©up scenarios and capital flows     
             Capital flows to FCPEs and developing countries
     18.4 Effect on the world economy
     18.5 Exchange rates
     18.6 Dismantling the rouble zone
     18.7 The order of liberalization in the FCPE
             Second best policies

19 International Debt
     Introduction
     19.1 The debt problem
     19.2 Growth of international debt
             The debt service ratio
     19.3 Debt and economic growth
             Debt overhang
     19.4 Capital flight
     19.5 Governmental and national foreign indebtedness
     19.6 The lenders' trap
     19.7 Some debt-reform proposals
             The free-rider issue
     19.8 An international debt facility

20 International Monetary Reform
     Introduction
     20.1 Financing or adjustment?
             Choosing an international monetary system
     20.2 Designing an international monetary system
             More on exchange rates and consistency
     20.3 The costs and benefits of flexible exchange rates
     20.4 Alternative plans for the reform of the IMS
             The McKinnon plan
            The extended target zone proposal

Bibliography
Index
Notes: Includes bibliographical references (p. [396]-425) and indexes.
Previous ed. published under title: International money. 1986.