国际金融机构导论英文Lecture 4

Economic Crises recap

from lecture 3

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crises

Sovereign Debt

Crises

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Sovereign Debt Crisis – Meaning recap

from lecture 3

skoma itfi sovereign debt & banking

crises 3Sovereign Debt:

Bonds issued by a national government in a foreign currency,in order to finance the issuing country's growth.Sovereign Default:

A failure on the repayment of a county's government debts.

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Sovereign Debt Crisis – Meaning recap from lecture 3

skoma itfi sovereign debt & banking

crises 4? A sovereign debt crisis is generally defined as economic and financial problems caused by the (perceived) inability of a country to pay its public debt.

?This usually happens when a country reaches critical high debt levels and suffers from (perceived) low economic growth.

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IMF and Sovereign Debt

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crises

Previously we discussed the IMF mandate to:

1.To promote international monetary cooperation through a

permanent institution which provides the machinery for consultation and collaboration on international monetary problems.

2.To facilitate the expansion and balanced growth of

international trade , to contribute thereby to the promotion and maintenance of high levels of employment and real income.

skoma itfi sovereign debt & banking

crises 63.T o promote exchange stability,to maintain

orderly exchange arrangements among

members,and to avoid competitive exchange depreciation.

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4.To assist in the establishment of a multilateral system of payments in respect of current transactions and in the elimination of foreign exchange restrictions which hamper the growth of world trade.

5.To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards , thus providing them with the opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.skoma itfi sovereign debt & banking

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6. To shorten the duration and lessen the degree of

disequilibria, i.e. to maintain stability and prevent crises in the international monetary system , the IMF reviews country policies and national, regional, and global economic and financial developments through a formal system known as surveillance.

To prevent crises,the IMF uses Financial

Stability mechanisms .

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crises 8IMF and Sovereign Debt

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IMF’s Financial Stability Mechanisms skoma itfi sovereign debt & banking

crises 9?Surveillance

?Financing

?Technical assistance

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Surveillance

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wb 10Mandate of the IMF:

?Carried out annually

?Exchange rate and fiscal policies

?Balance of payments and external debt developments ?International and regional implications ?Identification of potential vulnerabilities ?Financial and banking sector issues ?Labour markets,governance and the environment where relevant to macro economic stability 10

Financing Mandate of the IMF:

?Structural adjustment plans

?Criticised that conditionalities as too severe

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Technical Assistance

skoma itfi imf &

wb 12Mandate of the IMF

?Design and implementation of Monetary Policy ?Institutional building (e.g. central bank)?Handling and accounting of transactions with the IMF ?Collection and refinement of statistical data ?Training of officials

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?For a fixed exchange rates monetary policy is highly

limited.

?Any attempt to adjust the money supply would result in a

change in the exchange rate, which will lead to arbitrage, which will drive the money supply right back to where it was in the first place.

?The central bank cannot do anything by changing the

amount of money circulating in a fixed exchange rate regime.

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crises 13Fixed Exchange Rate – Monetary Policy

Recent Global Economic Crises

What is the problem?

?Debt

?Deficit

?Balance of payments

?Banking or financial sector

You need to consider the following issues:

?Should there be government cuts?

?Why?

?How?

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Tighten the wrong wheel and a crash is inevitable.skoma itfi sovereign debt & banking

crises 15Recent Global Economic Crises – Role of National Governments Think of a trike. One wheel has come loose. What would you do?

Using UK as an Example There are political views of where society moves to and how it gets there.

The driver is the Prime Minister The mechanic is the Chancellor of

the Exchequer

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Using the UK as an Example skoma itfi sovereign debt & banking

crises 17The wheels are the various sectors of the economy ?Sustainable deficit or debt

?Balance of Payments

?Banking Sector

The task of the driver and mechanic is to keep the vehicle on the road.

Role of the IMF

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crises 18?Bail outs

?Conditional financing ?Structural adjustment package

Structural Adjustment Programs ?Reduce inflation

?Reduce government spending

?Promote exports

?Higher interest rates

?Currency devaluation

?Privatisation

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?Maternity Ward

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The hospital

Structural Adjustment Programs

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Structural Adjustment Programs

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