国际金融英语International-Finance-(II).ppt

单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,Unit 12.Goals of Monetary Policy,I.What is Monetary Policy?,Monetary policy is the central banks efforts to regulate the economy by managing the supply and cost of money and credit.It usually has four main goals:,maximum employment,a stable price level,maximum and sustainable economic growth,balance in international payments,.,II.Four Goals of Monetary Policy,a.Maximum Employment,a)When the economy operates below its capacity,there are some idle resources and workers,which results in unemployment and lower GDP.In order to combat such a situation,the central bank increase money supply to simulate the economy and solve the unemployment problem.,b)Types of unemployment,i),Frictional unemployment,（摩擦性失业）,involves searches by workers and firms to find suitable match-ups,is beneficial to the economy.,ii),Structural unemployment,（结构性失业）,is a mismatch between job requirements and the skills or availability of local workers.,But monetary policy can do little to handle it.,c)The goal of employment,Full employment,but not zero unemployment.A certain natural rate of unemployment is about 5 to 6 percent.(demand for labor equals the supply of labor),C.Maximum and Sustainable Economic Growth,The goal emphasizes the desirability of a rising standard of living and an expanding economy that creates jobs for an increasing population and minimize unemployment.“Sustainable”is important,for experience shows that efforts to make the economy grow too fast breed inflation,and eventual recession.,The goal of steady economic growth is closely related to the high employment goal because businesses are more likely to invest in capital equipment to increase productivity when unemployment is low.(The employed workers are potential customers to buy more of the goods.),In order to achieve maximum&sustainable economic growth,the central bank may loose the credit policy(increase money supply)to provide more funds to business and encourage them to invest to stimulate the economic growth.,D.Long-term Balance in International Payments,a)When the domestic money supply is more than the domestic money demand,which means the capital flows out to buy more foreign imports than exports or more investments in foreign countries.,b)When the domestic money supply is less than the domestic money demand,which means the capital flows in caused by more domestic exports than imports or more foreign investments domestically.,Hence,the central bank should monitor money supply to balance international payments.,III.Conflicts Among Goals,Supplementary Materials:Fiscal Policy,I.What is fiscal policy?,Fiscal policy entails the use of the governments taxation and expenditures policies in order to achieve macroeconomic goals,such as full employment,rapid economic growth,and stable price level,etc.,A.Balanced Budget,（预算平衡）,Fiscal policy is reflected through the governments spending,taxing and borrowing policies.It is one of the major tools,which might be used to help promote the macroeconomic goals.Government expenditures must be financed with either:(1)taxes and other revenues generated from the sale of services or assets or(2)borrowing.,When government revenues from taxes and sales of services are equal to government spending(including both purchases of goods and services,and transfer payments),the government has a balanced budget.,But,the budget need not to be in balance.,C.Influence the Economy by Governments Budget,The government budget is much more than a mere revenue and expenditure statement of a private organization,and it is the primary tool of fiscal policy.The government can alter its budget to influence the future direction of the economy,changes in the size of the federal deficit or surplus are often used to gauge whether fiscal policy is adding additional demand stimulus or imposing additional demand restraint to the national economy.,a),When an economy is operating below its potential capacity,in order to stimulate the economy,according to Keynesianism,the government should implement expansionary fiscal policy.In other words,the government should either increase its purchases of goods and services or cut taxes or both,of course,this policy will increase the governments budget deficit.In order to finance the enlarged budget deficit,the government will have to borrow from either private domestic sources or foreigners.,b),When an economy grows so fast that the inflation rises sharply.In order to curb inflation,the government should carry out restrictive fiscal policy.That is to say,the government reduces the purchases of goods and services and/or increase tax rate to collect more taxes to diminish aggregate demand directly and dampen consumption and investment.This leads to the slow-down of the national economy and the reduction of inflation rate.,III.Crowding-out Effect,（挤出效应）,B.The Impact of Crowding-out Effect on Economy,As the interest rate rises caused by crowding-out effect of fiscal policy,(1)Consumers will reduce their purchases of interest-sensitive goods,such as autos and housings.(2)More importantly,a higher interest rate will increase the borrowing costs of businesses.Businesses will delay to borrow for further investments(such as plant expansions and heavy equipment).,This reduction in private spending as the result of higher interest rate at least partially offset additional spending emanating from the deficit.So,the crowding-out effect suggests that the impact of a budget deficit on economy may not be very potent.So,it will slow down the overall national economy.,In an open economy,the higher interest rate will lead to an inflow of capital,a currency appreciation,and a decline in exports.,Unit 13.The Capital Market,I.What is the capital market?,The capital market refers to a market where encompasses any transaction involving long-term debt with more than a one-year maturity.(The word“capital”infers a long-term commitment on part of the lenders and long-term need for the funds on part of borrowers.),II.Bonds&Notes,A bond or note usually refers to a marketable debt instrument with maturity more than one year.Notes have shorter maturities generally a maximum original maturity of 10 years or less,such as US T.N.,Notes and bonds are contracts that stipulate a series of fixed payments from the issuer to the holder.The payments are usually semiannual or once a year,sometimes quarterly.The final payment also the face value of the bond or note.Bonds and notes may be offered by a private company,a local or federal government,a foreign firm of government.Most bonds and notes are marketable.,Notes:,Most bonds or notes include the following information:,(i)The name of the issuer;,(ii)Face value(Par value);,(iii)The maturity date is the date of final payment;,(iv)Coupon rate;,(v)Interest payment date;,(vi)Trustee(A trust company or large bank.),Bonds need not have a maturity,they may pay a fixed amount per year forever.These bonds are called,perpetuities,（永续年金）,which have been sold by the government.,a.,All corporate stock represents an ownership interest in a corporation,conferring on the holder a number of important rights as well as risks.There are 2 types of corporate stock:,common and preferred stock,（普通股和优先股）,.,b.,Common stock represents a residual claim against assets of the issuing firm,entitling the owner to share in the net earnings of the firm when it is profitable and share in the net market value(after all debts are paid)of the companys assets if it is,liquidated,（清算）.,By owning common stock,the investor is subject to the full risks of ownership,which means that the business may fail.,If a company with outstanding shares of common stock is liquidated,the debts of the firm must be paid to the creditors first from any assets available.Then,the preferred stockholder receive their share of any remaining funds.At last,whatever is left accrues to common stockholder on a pro data basis.,Benefits Enjoyed by Common Stockholders,Common stockholders can elect the companys board directors.,They have preemptive rights,which give the current shareholders the right to purchase any new stock,convertible bonds or preferred stock issued by the firm in order to maintain a pro rata share of ownership when rationing.,Common stockholders may vote on all matters that affect the firms important strategies,such as M&A and hiring or dismissal of the senior executives,etc.,c.,Preferred stock occupies the middle place between debt and common stock,including advantages and disadvantages of both firms of raising long-term funds.Preferred stockholders have a prior claim over the firms assets and earning relative to common stockholders.Generally,preferred stockholders have no voice in the selection of management unless the corporation fails to pay dividends for a stipulated period of time.,In fact,the bulk of preferred stocks usually have a,call provision,（赎回条款）,.,When the interest rates decline,the issuing company may exercise the call privilege by a,sinking fund provisions（偿债基金条款）,at the price stated in the former formal agreement between the firm and its shareholders.,A few preferred stocks are convertible into shares of common stock at the investors option.,I.What are the financial markets?,a.,The financial markets are the markets where securities are exchanged as goods.,b.,Financial markets can be classified into several groups based on different standards:,(i)Primary market&Secondary market,(based on function),(ii)International market&Local Market,(based on region),(iii)Money market&Capital market,(based on the term of debt instrument),II.Primary Market,(,一级市场）,B.,Investment banks are the intermediation of the financial market and help the issuing company to issue the stock to the public.They advise corporations in the design of the security-what type of security it should be(common stock,preferred stock or bond).If it is a bond,what rate of interest it should bear,what its maturity and provision should be,etc.,e.g.,stock (wholesaler)stock,issuing company investment bank public,fund fund,This process is called underwriting,in this case,that the investment bank buys the securities from the issuing company and then sells them to the public,making its profits like other merchant on the,spread,（差幅）,between its buying and selling prices.Because the investment bank assumes a substantial measure of risk in an underwriting operation,large issues of new securities usually will be syndicated among several investment banks.,C.Private Placement of Securities(,私募,）,Private placement means the issuers of the securities sell them directly to investors,without the underwriting services of an investment bank.,e.g.,stock,issuing corporation public,funds,Note:,Bypass the intermediation of an investment bank,there are some benefits,such as underwriting cost-saving,compliance of the terms of securities with the needs of the buyer,etc.,III.The Secondary Market,(,二级市场）,A.,Function of the secondary market,:Since many of the initial buyers of securities will eventually want to resell them,there is also the secondary market for previously issued securities to transfer.,B.,Registered stock exchange,&,Over-the-counter,(记名股票市场和,场外交易）,C.,Role of the secondary market,The role of the secondary market is to make the primary market possible.With a secondary market,the initial buyer of the security knows that it can be resold to someone else in a year of two.In this fashion,the secondary market in securities is said to give liquidity(exit)to primary issues,this liquidity is an essential ingredient in the capital formation process of a countrys economy.,Unit 15.Tools of Monetary Policy,I.In order to monitor the economy,the central monetary authorities have to use 2 major tools to implement monetary policy,which is to influence the movements of interest rates.The 2 major tools are as followed:,a）General Credit Control,(总体信贷控制),b）Selective Credit Control,(,选择性信贷控制,),II.General Credit Control,A.Definition of general credit control:,General credit control affects the entire banking and financial system through,reserve requirements(,法定,储备金要求,),the discount rate(,贴现率,),and,open market operations(,公开市场操作,).,B.Reserve Requirements:,It was believed that the primary purpose of reserve requirements was to safeguard the public deposits and avoid bank run.,(1)reserve requirements reduced a portion of what were required reserve now becomes excess reserves depository institution soon convert all or a portion of these newly created excessive reserves into loans and investment expand money supply lower interest rate lower the borrowing cost of businesses more businesses borrow funds to increase investments stimulate the economy(2)If all institutions are fully loaned up,with zero excess reserves,increase of reserve requirements some depository institutions will be short of required legal reserves these institutions will be forced to sell securities,cut back on loans or borrow reserves from other financial institutions to meet the reserve requirements decrease money supply increase interest rate increase the borrowing costs of businesses less businesses borrow funds to increase investments slow down the economy,C.Discount rate is the annual percentage interests charged on those institutions choosing to borrow from the Feds discount window.,(1)increase discount rate borrow from the Fed is more costly than to use some other sources of funds increase the borrowing costs of commercial banks decrease money supply to the overall economy to stir the economy,(2)decrease discount rate borrow from the fed is less costly than to use some other sources of funds decrease the borrowing costs of commercial banks increase money supply to the overall economy to slow down the economy,D.Open Market Operation,Open market operations consist of buying and selling US government securities by the Fed to affect the money supply,ultimately general credit conditions.It is the most flexible policy tool available to the Fed,suitable for fine-tuning the financial markets when this is necessary.,(1)Fed buys securities inflow of the funds to the banking system and expansion of its abilities to make loans and create deposits increase the money supply to stir the economy,(2)Fed sells securities outflow of the funds from the banking system and decrease of its abilities to make loans and create deposits decrease the money supply slow down the economy,III.Selective Credit Control,A.,Moral suasion(,道义劝说,),Moral suasion refers to the use of pressure by central bank to encourage banks and other lending institutions to conform with the spirits of its policies,such as the issuance of letters and public statements to urge banks to restraint in granting loans,B.Margin Requirements(,保证金要求,),According to the Securities Exchange Act of 1934,margin requirements were enacted into law.This federal law limits the amount of credit that could be used as collateral for a loan.Fed prescribes a maximum loan value for marginal stocks and