Chapter 1 Balance of Payments 1
1.1 International transactions： the balance of payments 2
1.2 Balance of payments surplus and deficit 8
1.3 Economic forces and the balance of payments 12
Chapter 2 Theories of Balance of Payments 21
2.1 The elasticity approach to the balance of payments 22
2.2 The absorption approach to the balance of payments 26
2.3 The monetary approach to the balance of payments 27
Chapter 3 Macroeconomic Policy in an Open Economy 33
3.1 The problem of internal and external balance 35
3.2 The Mundell-Fleming model 37
3.3 Conclusions 51
Chapter 4 Fixed， Floating and Managed Exchange Rates 55
4.1 Definitions and types of the exchange rate 57
4.2 The case for fixed exchange rates 59
4.3 The case for floating exchange rates 62
4.4 Managed floating 64
4.5 Conclusions 70
Chapter 5 Models of Exchange-rate Determination 75
5.1 Purchasing power parity 77
5.2 Covered interest parity 85
5.3 Market efficiency， uncovered interest parity and real interest parity 93
5.4 Foreign exchange risk management 103
Chapter 6 The Foreign Exchange Market 125
6.1 The basics of the foreign exchange market 126
6.2 Mechanics of the foreign exchange market 132
Chapter 7 Currency Futures， Options and Swaps 149
7.1 Introduction 150
7.2 Currency futures 151
7.3 Currency options 154
7.4 Currency and interest swaps 157
Chapter 8 International Lending and Financial Crises 169
8.1 International lending to developing countries 171
8.2 Financial crises： what can and does go wrong 180
8.3 Resolving financial crises 183
8.4 The frequency of financial crises 187
Chapter 9 The International Monetary System 191
9.1 History of the international monetary system 193
9.2 Contemporary currency regimes 201
9.3 Emerging markets and regime choices 205
9.4 The birth of a European currency： the euro 209
9.5 Exchange rate regimes： what lies ahead？ 214
Chapter 10 International Banking and the Eurocurrency Market 221
10.1 The Eurocurrency market 223
10.2 International funds transfer and credit expansion through the Eurocurrency system 230
10.3 The Eurocurrency market and balance of payments disequilibrium 235
10.4 International banking： structure and instruments 239
Chapter 11 Foreign Direct Investment and International Capital Budgeting 249
11.1 Background 250
11.2 Approaches to international business 253
11.3 Theories of FDI 255
11.4 More about taxation 260
11.5 Foreign direct investment and country risk 263
11.6 Transfer pricing 266
Key to Exercises 271
Test One 293
Key to Test One 300
Test Two 302
Key to Test Two 308
References 310