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Intro to international relations (class 10)
1.
PLS 150 INTRO TO INTERNATIONALRELATIONS
DR MAJA SAVEVSKA
Assistant Professor
Department of Political Science and International Relations
SSH | Nazarbayev University
Office: 8.502
Email: [email protected]
30-11-22
Intro to IR
Nur-Sultan, Kazakhstan
2.
Week TenMonday
Wednesday
Friday
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Kahoot
(10 min)
• Lecture
(20 min)
• Interactive
Activities
3.
AnnouncementDiscussion Board II
October 28, Friday 4pm
4.
Current Events5.
RecapWhat is the difference between portfolio and
foreign direct investments?
What is sovereign lending?
What is the international investment regime?
What are bilateral investment treaties?
6.
Issue Areas in IPETrade
Production and MNCs
Monetary and Financial Affairs
Development and Inequality
7.
International Monetary SystemWhat is it?
The glue that keeps national economies
together
The purpose of international monetary system
Facilitate exchanges among countries
8.
International Monetary SystemWhy we need it?
Countries have national currencies that are no
legal tender in other countries
Legal tender is medium of payment
recognized by a domestic legal system
Ex: Kazakh tenge is the legal tender of
Kazakhstan
9.
International Monetary SystemTypes
Commodity standard
Commodity backed paper standard
Paper currency standard (fiat)
10.
Key ConceptsExchange Rate
Price of one currency in terms of another
Ex: $1 = 439 Kazakh tenge
Its value can go up and down:
If the value of the KZT relative to the $
goes down than it depreciates ($1=500
KTZ)
If the value of the KZT relative to the $
goes up than it appreciates ($1=150 KZT)
11.
Euro to Dollar exchange rate 20 October 2022: EUR 1 = USD 0.9811Source: ECB
12.
Key ConceptsExchange Rate Types
Fixed exchange rates
ii) Floating exchange rates
i)
13.
14.
Week TenMonday
Wednesday
Friday
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Kahoot
(10 min)
• Lecture
(20 min)
• Interactive
Activities
15.
Current Events16.
Key ConceptsBalance of Payments
Accounting device, a record keeping between
a country and the rest of the world.
Two categories: current and capital account
Current: trade (goods and services), income
account, and unilateral transfers
Capital (financial): financial flow (net change
of ownership of assets) – FDI, portfolio
investments, bank loans, reserves
17.
Key ConceptsBalance of Payments Adjustments
Under floating exchange rates:
Balancing via movement of exchange rates
Ex: if demand for dollars in Kazakhstan
increases (people are importing more goods
than they sell abroad), then the tenge will
depreciate and vice versa.
18.
Key ConceptsBalance of Payments Adjustments
Under fixed exchange rates:
Balancing via changes in domestic prices
If the demand for dollar increases in
Kazakhstan, the central bank will increase
interest rates to curtail the supply of money
and in turn prices will fall. The country can
also use its foreign exchange reserves or
borrow money.
19.
Open Economy Politics (Lake)Interests
Domestic Institutions
Interstate Bargaining
20.
InterestsPreference Formation
Preference for monetary policy choices:
Exchange rate regimes
International monetary regimes
Actors:
Import-competing producers
Export oriented producers and investors
21.
International Monetary SystemsGold Standard:
Fixed exchange rate system
Bretton Woods
Post Bretton Woods
22.
Gold StandardTwo constitutive elements:
Monetary unit is defined in terms of
certain amount of gold
Ex: 1 ounce of gold = $20.67
Obligation to redeem a note in gold
i.e. convertibility
23.
Gold Standard – Rules of the GameDeficit country: its central bank can intervene
to prevent the outflow of gold by reducing
the supply of money and boosting the
competitiveness of its exports
Instruments:
i)
Interest rate (discount rate): central banks
increase/decrease the credit in the economy
24.
Interests RateDeficit: central bank will increase the
interest rate
reduction in money
supply
fall in price level
imports will become expensive, its
exports more competitive
Surplus: central bank will decrease the
interest rate
increase in money
supply
increase in price level
imports will become cheaper, its
exports more expensive
25.
Political ProblemsWilliam Jennings
Bryan vs. William
McKinley
Gold Standard was a
force of deflation
Farmers were ‘nailed
to a cross of gold’
26.
Gold StandardWhy it worked?
No franchise, no pressure to subordinate
currency stability to other objectives
Wages and price were flexible
27.
International Monetary RegimesGold Standard
Fixed-exchange rate system
Bretton Woods
First effort of multilateral cooperation
Last effort to establish fixed-exchange rates
Post Bretton Woods
28.
Invasion of Normandy29.
Bretton Woods Conference30.
Bretton Woods NegotiationsNobody liked
floating
exchange rates
The solutions to the dilemma were:
fixed but adjustable exchange rates
capital controls
Agreement was reached in July 1944
Yet, a rerun to the
GS was
impossible
because of
emergence of
political constrains
31.
Bretton WoodsDeparture from the Gold Standard
1) Pegged, but adjustable exchange rates
2) Capital controls
3) International Monetary Fund
Monetary Fund: credit mechanism consisting of
pool of currencies contributed by members
32.
Week TenMonday
Wednesday
Friday
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Current
Events (10
min)
• Lecture on
monetary
politics
(40 min)
• Kahoot
(10 min)
• Lecture
(20 min)
• Interactive
Activities
33.
Kahoot34.
From $ Shortages to GlutUnintended consequence: dollar was primary
reserve asset
Dollar was as good as gold
$ glut was a consequence of the US’s persistent
trade deficit
Dilemma: dollar overhang can engender the fixed
exchange-rate system, but strengthening the dollar
can lead to global deflation
Exorbitant privilege of the dollar
35.
Features of Fixed Exchange RatesCentral banks commit themselves to defending a
given exchange rate
Then it become difficult to defend the exchange
rate
Speculators precipitate its abandonment
By its very definition FER are vulnerable to
speculative attacks
36.
Nixonhttps://www.youtube.com/watch?v=iRzr1QU6K1o
37.
International Monetary RegimesGold Standard
Fixed-exchange rate system
Bretton Woods
First effort of multilateral cooperation
Last effort to establish fixed-exchange rates
Post Bretton Woods
38.
Floating Exchange RateDeparture from the Bretton Woods
Floating exchange rates
Capital mobility
IMF (new purpose)
Monetary Fund: credit mechanism consisting of
pool of currencies contributed by members
39.
Amendment of Articles of AgreementRevision of Article IV
Sec 1: Countries are free to choose methods of
currency exchange as long as they were
promoting stability, orderly economic growth and
not directed at manipulation of exchange rate
40.
DataIMF’s Annual reports on exchange rates
41.
Activity (IMF Report)Read the IMF report on exchange rate
arrangements.
What type of exchange rate systems we have
nowadays?
How many countries use the dollar as anchor?
How many countries use the euro as anchor?
42.
43.
44.
45.
Q&ADr Maja
Savevska
Thank you for your attention