asian economy 2114

Topics: International economics, Foreign exchange market, Inflation Pages: 25 (4466 words) Published: January 17, 2014
Financial Crisis and Reform in Asia

(ECON2114 Lecture Notes)
(2014/01/06)

Chapter 1 Introduction to Financial Crisis

1.1 Basic data of the financial crisis
1.2 Equilibrium exchange rate
1.3 Arbitrage and speculation
1.4 Role of the currency
1.5 Balance sheet
1.6 The history of international currency
1.7 Exchange rate system in the world
1.8 The exchange system
1.9 Determines to exchange rate
1.10 Balance pivot
1.11 Currency Crisis Theory
1.12 Five conditions for a country to be attacked

Chapter 2 Bubble economy and financial crisis (Japan, Thailand)

2.1 Economic bubble
2.2 What is the bubble economy?
2.3 Conditions for bubble economy
2.4 Break of bubble
2.5 Process of currency crisis in bubble economy
2.6 Impact of burst bubble on Japan's economy
2.7 Bubble economy in Hong Kong, Taiwan
2.8 Bubble economy in Thailand

Chapter 3 Government industry policy and financial crisis (Korea)

3.1 High economic growth rate in Korea
3.2 The process of financial crisis in Korea

Chapter 4 Active devaluation (China)

4.1 Two types of devaluation
4.2 Pros and cons of initiative devaluation
4.3 Active devaluation of the currency in China from 1980 to 1994 4.4 Three groups of export products
4.5 Devaluate or not

Chapter 5 Measurement of security for financial system

5.1 Security of a country's financial system
5.2 Foreign Currency Reservation and Surplus on Current Account (FR+NX) 5.3 Debt Structure and Foreign Debt (FD)
5.4 Capital inflow (NL)
5.5 Capital Outflow (KO)
5.6 Foreign speculative demands (SD)
5.7 Amplifying Effect of External Shock ()
5.8 Degree of security of China’s financial System
5.9 Why did China's financial system quite stable?
5.10 Financial security indicators

Chapter 6 Financial reform and economic recovery

6.1 Management of Bank
6.2 Challenge to the state owned banks after accession of WTO 6.3 Why did performance of SOB so poor?
6.4 How can we recover Asian Economies?
6.5 How can we recover Asian Economies?

Chapter 1, Introduction to Financial Crisis

1.1 Basic data of the financial crisis

Table C1, Exchange rate in Asian countries
Table C2, Economic growth rate in Asian countries
Table C3, Financial market in Asian countries

1.2 Equilibrium exchange rate

Money supply and money demand for domestic currency
Figure 1, Equilibrium exchange rate
Role of the central bank: to stable the exchange rate
Foreign currency reservation includes:
Foreign currency
Bond of foreign government
Stock certificate
Dividend coupon
Banker's draft
Commercial Bill of Exchange

1.3 Arbitrage and speculation

To buy some currency at low rate and sale it at high rate
Multi-currency arbitrage
The total amount of foreign exchange transaction is 1200 billion USD per day 20% for trade and investment
80% for speculation
Total amounts of speculate capital is 7200 billion USD.

1.4 Role of the Currency

(1) Medium of transaction
A female singer from France visited Society Island in 19 century. The local resident would like to pay her for each song 3 pigs, 23 turkeys, 44 chickens and many fruits. The total value of the payment was 5 times higher the price level in Paris. (2) Unit of accounting

Between 100 products, we need 4950 relative prices.
(3) Store value
(4) Delay payment

1.5 Balance sheet

(1) Current account, effect exchange rate
• Visible trade imports and export
• Invisible trade: labor and service (transportation, insurance etc.) gain from investment, • Deposit, stock, rent etc.
• Unilateral transfers, aid, donation
(2) Capital account, short-term effect on exchange rate
• Long-term investment
Direct investment, bond investment, long-term loan to construction • Short-term capital
Loan, deposit, short-term bond
(3) Reserve settlement account
• Official reservation: gold, foreign currency, IMF fund, etc.

1.6 The history of international currency

As a symbol of value the most important is stability...
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