Money in International Exchange The Convertible Currency System

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ISBN: 9780195024098 | 0195024095
Cover: Paperback
Copyright: 6/21/1979

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How do nations trade when no purely international money exists? This book describes how the use of national currencies, only some of which have the important international property of being convertible, allows most of world trade to be effectively monetized rather than bartered. Professor McKinnon's analysis represents the first attempt to focus on the microeconomic and monetary aspects of international exchange, and addresses unresolved problems in securing mutual monetary adjustment among the world's great trading economies.

In Search of International Money: The Convertible Currency System	p. 3
Convertibility and Commercial Trading: Official Restraints on Asset Choice	p. 4
The Interbank Market for Convertible Currencies	p. 9
The Monetary Conditions for Long-Run Exchange Stability	p. 13
Technical Note: Foreign Exchange Quotations	p. 21
Intervention by Central Banks In A World of N Currencies	p. 27
N Currencies and N - 1 Exchange Rates	p. 28
Official Parities and Triangular Arbitrage	p. 30
The Choice of the Nth Currency	p. 34
The United States Dollar as a Vehicle Currency for Commercial Banks	p. 38
Inconvertibility, Less Developed Countries, and Pegged Exchange Rates	p. 39
Fixed versus Floating Exchange Rates	p. 43
Currency Inconvertibility and the Foreign Trade of Centrally Planned Economies	p. 47
Central Planning and Commodity Inconvertibility	p. 48
Multilateral Exchange with the West	p. 50
Bilateralism within the Council for Mutual Economic Assistance (CMEA)	p. 52
The Determination of Foreign Trade Prices in the CMEA	p. 55
Barter, Command Planning, and Economic Sovereignty	p. 60
A Gold Ruble?	p. 62
Full Liberalization and the Monetary Conditions for Exchange-Rate Stability	p. 64
Hedging by Exporters and Importers	p. 68
The Currency of Invoice: Tradables I and II	p. 72
Currency Risk and the Structure of Trade Credit	p. 78
Inventory Valuation Adjustment versus Forward Covering	p. 80
Financial Predominance, Tradables II, and the Optimum Double Hedge	p. 83
Technical Note: Optimum Forward Cover	p. 89
Forward Covering and Interest Arbitrage in Imperfect Capital Markets	p. 94
The Trader's Liquidity and Spot versus Forward Covering	p. 95
The Empirical Magnitude of Forward Transacting	p. 98
Hedging Pressure and Bias in the Forward Exchange Rate	p. 101
The Importance of Covered Interest Arbitrage	p. 104
Forward Market Equilibrium and Interest-Rate Parity	p. 108
Imperfections in the Supply of Arbitrage Funds	p. 110
Short-Term Capital Flows and the Public Interest	p. 112
Technical Note: Covered Interest Arbitrage	p. 114
Purchasing Power Parity	p. 117
The Law of One Price and the Absolute Version of Purchasing Power Parity	p. 118
Relative Purchasing Power Parity and the "Real" Exchange Rate	p. 121
Some Bilateral Statistical Comparisons	p. 123
Multilateral Comparisons of Effective Exchange Rates and Prices	p. 128
Deviations from the Law of One Price under Fluctuating Exchange Rates	p. 133
Implications for Trader Hedging	p. 136
Per Capita Income Comparisons and Exchange-Rate Conversions	p. 137
Speculation	p. 142
Floating Exchange Rates among Convertible Currencies	p. 144
On Aggregating Open Positions over All Maturities	p. 145
The Demand for Stabilizing Speculation and the "J" Curve	p. 148
The Supply of Stabilizing Speculation	p. 155
Banking Risk versus Currency Risk	p. 156
Multinational Corporations and Other Nonspeculators	p. 159
Speculating without International Money	p. 160
Pegged Exchange Rates and Speculation against Central Banks	p. 163
Leads and Lags	p. 166
Changing the Currency of Invoice	p. 169
Official Speculation and Exchange Controls	p. 170
Fluctuating Exchange Rates, 1973-1978: A Qualified Monetary Interpretation	p. 176
Keynesian Liquidity Preference and the Rate of Interest in an Open Economy	p. 177
Foreign Exchange Dealers and the Domestic Money Market	p. 181
The Interest Elasticity of the Liquidity-Preference Function	p. 184
Exchange-Rate Fluctuations under Full Information	p. 187
Uncertain Expectations	p. 192
Optimum Currency Areas	p. 192
Intervention by Central Banks: A Concluding Note	p. 195
The Eurocurrency Market	p. 197
Regulatory Asymmetry: A Potted History	p. 200
The Mechanics of Transacting and the Scope of the Market	p. 207
Problems of Statistical Measurement: Some Conceptual Difficulties	p. 210
The Foreign Exchange Aspect: Covering and Interest Arbitrage	p. 213
Liquidity Creation and Domestic Financial Intermediation	p. 218
International Capital Transfers	p. 222
A Concluding Note on Regulation	p. 230
Monetary Unions and Fixed Exchange Rates	p. 231
Secular Growth in the Money Supply and the Prices of Tradable Goods	p. 233
Official Intervention and Nonsterilization	p. 238
The Symmetry Rule and the Aggregate Monetary Base	p. 240
On Flexing the System: Discounting and Short-Term Capital Flows	p. 241
Concluding Note	p. 247
America's Role in Stabilizing the World's Monetary System	p. 248
The Marshall Plan and the Remonetization of Western European Trade (1948-1959)	p. 250
Realization of the Bretton Woods Agreement and the Dollar-Gold Exchange Standard (1959-1968)	p. 254
Uncertainly Pegged Exchange Rates and the International Transmission of Inflation (1968-1973)	p. 261
Freely Floating Exchange Rates (1973-Present)	p. 267
Proposals for International Monetary Reform	p. 270
On Extending Currency Convertibility to Less Developed and Centrally Planned Economies	p. 271
A Commodity-Reserve Currency?	p. 272
Artificial Currency Units and Special Drawing Rights	p. 279
The Seigniorage Problem and the Link to Less Developed Countries	p. 283
Name Index	p. 293
Table of Contents provided by Syndetics. All Rights Reserved.

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Money in International Exchange The Convertible Currency System

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