Chapter 21 Chapter 21 The Global Capital Market: The Global Capital Market: Performance and Policy Problems Performance and Policy Problems Prepared by Iordanis Petsas To Accompany nternational Economics: Theory and Policy nternational Economics: Theory and Policy, Sixth Edit by Paul R. Krugman and Maurice Obstfeld
Chapter 21 Chapter 21 The Global Capital Market:The Global
Capital Market:Performance and Policy ProblemsPerformance and
Policy ProblemsPrepared by Iordanis PetsasTo Accompany
International Economics: Theory and Policy International Economics:
Theory and Policy, Sixth Editionby Paul R. Krugman and Maurice
ObsteldSlide 21-2 Copyright2!!" Pearson #d$cation% &nc'
&ntrod$ction The &nternational Capital Market and the Gains
from Trade &nternational (anking and the &nternational
Capital Market )eg$lating &nternational (anking *o+ ,ell *as
the &nternational Capital Market Performed- S$mmaryChapter
.rgani/ationSlide 21-" Copyright2!!" Pearson #d$cation%
&nc'&ntrod$ction International ca!ital mar"et0 The gro$p of
closed interconnected markets in +hich residents of different
co$ntries trade assets s$ch as c$rrencies% stocks and bonds0 This
chapter foc$s on three main 1$estions:2*o+ has the international
capital market enhanced co$ntries3 gains from trade-2,hat ca$sed
the rapid gro+th in international financial acti4ity that has
occ$rred since the early 156!s-2*o+ can policymakers minimi/e
problems raised by a +orld+ide capital market +itho$t sharply
red$cing the benefits it pro4ides-Slide 21-7 Copyright2!!" Pearson
#d$cation% &nc' Three Types of Gain 8rom Trade0 All
transactions bet+een the residents of different co$ntries fall into
one of three categories:2Trades of goods or ser4ices for goods or
ser4ices2Trades of goods or ser4ices for assets2Trades of assets
for assetsThe &nternational Capital Market and the Gains 8rom
TradeSlide 21-9 Copyright2!!" Pearson #d$cation% &nc'The
&nternational Capital Market and the Gains 8rom Trade#igure
$%&%: The Three Types of &nternational TransactionGoods and
ServicesAssetsGoods and ServicesAssetsHome ForeignSlide 21-6
Copyright2!!" Pearson #d$cation% &nc' )isk A4ersion0 The risk
associated +ith a trade of assets is shared +hen assets are traded
internationally'2,hen people are risk a4erse% co$ntries can gain
thro$gh the e:change of risky assets'2&nternational capital
markets make these trades possible' The &nternational Capital
Market and the Gains 8rom TradeSlide 21-; Copyright2!!" Pearson
#d$cation% &nc' Portfolio
