11:373:101 Lecture Notes - Lecture 20: Los Angeles Times, Exchange Rate, United States Dollar

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Topic 18 (cid:1543) trade and exchange rates 1. Imf officials pressured argentina to abandon the [system under which the value of their currency is pegged to the u. s. dollar] Devaluation [of the argentine peso] would ease pressure on central bank"s reserves, at the cost of slashing argentines" buying power in the global market -- los angeles times, 2/18/03. Even without money, trade would still be present. Europe to us: italian shoes, wine, cell phones. Difference in arrow size (cid:1543) some type of deficit is occurring. Measure surpluses or deficits for two types of international money flows: Current account (cid:1543) money spent on imports, exports, tourism, etc. Capital account (cid:1543) money flows resulting from buying or selling assets located in other countries (land, stocks, government bonds, etc. ) Both accounts reflect a mismatch of money flow. Because (x m) was negative, there was a deficit on the current account. Us used to run surpluses rather than deficits.

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