EECS 1530 Lecture Notes - Lecture 16: Risk Premium, Bretton Woods, New Hampshire, International Monetary Fund
21 Jun 2018
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EECS 1530 Lecture 16 Notes
Introduction
Agencies that facilitate international flows
The United States would still be able to obtain funding for its debt, but its interest rates
(cost of borrowing) would rise.
In general, access to international funding has allowed more growth in the U.S.
economy over time but has also made the United States more reliant on foreign
investors for funding.
Such reliance remains possible provided the U.S. government and U.S. firms are
perceived to be creditworthy.
If that trust were ever weakened, then U.S. entities would be able to obtain foreign
funding only by paying a higher interest rate to compensate for the increased risk (i.e., a
risk premium).
In recent years, the Federal Reserve (the U.S. central bank) has maintained the country’s
long-term interest rates at a very low level
This policy is intended to encourage more borrowing and stimulate the economy.
Yet the low rates could also lead foreign investors to seek alternative investments
offering a higher return.
In that case, if the Fed wants low interest rates then it may need to supply more of the
funding itself to replace those funds withdrawn by foreign investors.
A variety of agencies have been established to facilitate international trade and financial
transactions.
These agencies often represent a group of nations.
A description of each of the more important agencies follows.
International Monetary Fund
Document Summary
The united states would still be able to obtain funding for its debt, but its interest rates (cost of borrowing) would rise. In general, access to international funding has allowed more growth in the u. s. economy over time but has also made the united states more reliant on foreign investors for funding. A variety of agencies have been established to facilitate international trade and financial transactions. These agencies often represent a group of nations. A description of each of the more important agencies follows. The united nations monetary and financial conference held in bretton woods, new. Hampshire, in july 1944 were called to develop a structured international monetary system. As a result of this conference, the international monetary fund (imf) was formed. Access to international funding has allowed more growth in the u. s. economy over time but has also made the united states more reliant on foreign investors for funding.
