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Financial Markets and International Capital Flows Chapter 11
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Chapter 11 Learning Objectives. You should be able to: Identify the features of bonds and stocks. Define capital inflows and capital outflows. Relate the trade balance to capital inflows and outflows. Relate national saving rates to international capital flows.
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Coupon Bond Most bonds with maturities greater than a year are of this form. Coupon bonds issued by Federal government (Treasurys) State and local governments (munis) Corporations (corporates)
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Stocks Represent shares of ownership. Quarterly dividends. Price reflects expected future profitability.
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International Capital Flows Capital inflows: foreign investors buying domestic assets Capital outflows: domestic investors buying foreign assets.
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Balance of Payments NX + KI = 0 → KI = -NX
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Saving & Investment in International Economy Y = C + I + G + NX Y – C – G – NX = I -NX = KI Y – C – G = S → S + KI = I
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