1. Balance of payments and Exchange Rates

2. Balance of payments & exchange rates
The balance of payments account
Example of UK balance of payments

3. Balance of payments & exchange rates
The balance of payments account
The current account

4. UK balance of payments: 2001 (£ millions)

5. UK balance of payments: 2001 (£ millions)

6. UK balance of payments: 2001 (£ millions)

7. UK balance of payments: 2001 (£ millions)

8. UK balance of payments: 2001 (£ millions)

9. UK balance of payments: 2001 (£ millions)

10. Current account balance as % of GDP in selected countries: 1970–2003

11. Current account balance as % of GDP in selected countries: 1970–2003UK

12. Current account balance as % of GDP in selected countries: 1970–2003UK
USA

13. Current account balance as % of GDP in selected countries: 1970–2003
Japan UK
USA

14. Balance of payments & exchange rates
The balance of payments account
The capital account

15. UK balance of payments: 2001 (£ millions)

16. Balance of payments & exchange rates
The balance of payments account
The financial account

17. UK balance of payments: 2001 (£ millions)

18. UK balance of payments: 2001 (£ millions)

19. UK balance of payments: 2001 (£ millions)

20. UK balance of payments: 2001 (£ millions)

21. Balance of payments & exchange rates
The balance of payments account
The overall
balance of payments

22. UK balance of payments: 2001 (£ millions)

23. UK balance of payments: 2001 (£ millions)

24. Balance of payments & exchange rates

25. Sterling exchange rates: 1980–2003

26. Sterling exchange rates: 1980–2003

27. Sterling exchange rates: 1980–2003

28. Sterling exchange rates: 1980–2003

29. Balance of payments & exchange rates
Determination of the exchange rate

30. Determination of the rate of exchange
$ price of £
Q of £

31. Determination of the rate of exchange
$ price of £
D by USA
Q of £

32. Determination of the rate of exchange
S by UK b a QD QS
$ price of £
D by USA
Q of £

33. Determination of the rate of exchange
S by UK
$ price of £ d c QS QD
D by USA
Q of £

34. Balance of payments & exchange rates
Changes in the
exchange rate

35. Floating exchange rates: movement to a new equilibrium
€ / £ D1
Q of £

36. Floating exchange rates: movement to a new equilibrium
€ / £ D1
Q of £

37. Floating exchange rates: movement to a new equilibrium
€ / £ D1 D2
Q of £

38. Balance of payments & exchange rates
Speculation against
exchange rate movements

39. Stabilising speculation
er1
Exchange rate D1 O
Quantity of £s

40. Stabilising speculation
er1
Exchange rate
er2 D1 D2 O
Quantity of £s

41. Stabilising speculation
er1
er3
Exchange rate
er2 D1 D2 D3 O
Quantity of £s

42. Destabilising speculation
er1
Exchange rate D1 O
Quantity of £s

43. Destabilising speculation
er1
er2
Exchange rate D1 D2 O
Quantity of £s

44. Destabilising speculation
er1
er2
Exchange rate
er3 D1 D3 D2 O
Quantity of £s

45. Balance of payments & exchange rates
Movements in the sterling exchange rate over time

46. $ / £ exchange rate and £ exchange rate index: 1976-2003

47. $ / £ exchange rate and £ exchange rate index: 1976-2003

48. $ / £ exchange rate and £ exchange rate index: 1976-2003
1990=100
$ / £

49. $ / £ exchange rate and £ exchange rate index: 1976-2003
1990=100
$ / £

50. Balance of payments & exchange rates
Movements in the dollar/euro exchange rate from 1999 to 2003

51. Fluctuations between the euro and the dollar

52. Fluctuations between the euro and the dollar
US interest
rate

53. Fluctuations between the euro and the dollar
US interest
rate
ECB
interest rate

54. Fluctuations between the euro and the dollar
US interest
rate
$ / €
ECB
interest rate
$ / €