NFI = GNP - GDP CA = (X-IM) + NFI +ut FA=OUTFLOWS−INFLOWS BOP = CA + FA + KA = 0 Payment gap = CA- FA Core balance = CA financed by stable flows BOF & Forex : Importations de biens/services/investissement Offre de monnaie locale augmente → Dépréciation Exportations de biens/services Demande de monnaie locale augmente → Appréciation BC controls the change : - Buying foreign currency reserves to compensate and prevent an excessive rise in the exchange rate. - Lowering interest rates - Selling foreign currency reserves - Raising interest rates Facteurs influençant la demande et l’offre de devises (acronyme TIPSY) Epargne et CA S=I (close economy) S=I+CA Sg + Sp – I = CA (T-G) + (Sp-I) = CA Sp = Y – C – T (supply of loanable funds) I + CF (demand of loanable funds) The twin deficit refers to a situation where a country simultaneously experiences: Budget deficit: The government spends more than it collects in taxes. Current account deficit: The country imports more than it exports. "Effet d’éviction" (=crowding out) - Comme les taux d’intérêt augmentent, les entreprises privées ont plus de mal à emprunter. - Elles investissent moins, ce qui ralentit la croissance économique. The NIIP (Net International Investment Position) represents a country's net position in terms of foreign debt and investments. NIIP = foreign assets held by residents - country's debt to foreign entities. If NIIP is positive, the country is a net creditor If NIIP is negative, the country is a net borrower . Théorie de Balassa-Samuelson : Les pays riches ont une productivité plus élevée dans les secteurs échangeables (ex : industrie, technologie), ce qui entraîne des salaires plus hauts dans toute l’économie, y compris dans les secteurs non échangeables (ex : services). The Impossible Trinity (Trilemma) : Free movement of capital (unrestricted inflows and outflows of investments). Fixed exchange rate (stable currency value against other currencies). Independent monetary policy (ability to set its own interest rates).