the Economics of foreign exchange and global finance.

Preface to the Third Edition
Preface to the Second Edition
Preface to the First Edition
Contents
1: Foreign Exchange Markets and Foreign Exchange Rates
	1.1 Foreign Exchange Rate Quotations and Arbitrage
		1.1.1 Foreign Exchange Quotations
		1.1.2 Cross Rates and Arbitrage
	1.2 Foreign Exchange Transactions
		1.2.1 The Bid-Ask Spread
		1.2.2 Transaction Costs and Arbitrage Opportunities
	1.3 Spot and Forward Exchange Rates
	1.4 Effective Exchange Rates
	1.5 Other Currency Markets
	Reference
2: Exchange Rate Arrangements and International Monetary Systems
	2.1 Exchange Rate Arrangements
	2.2 A Brief History of International Monetary Systems
	2.3 The European Single Currency
	References
3: International Parity Conditions
	3.1 Purchasing Power Parity
		3.1.1 Absolute Purchasing Power Parity
		Example
		Example
		3.1.2 Real Exchange Rates
		3.1.3 Relative Purchasing Power Parity
		3.1.4 Factors Contributing to the Departure from PPP
			3.1.4.1 Construction of Price Indexes
			3.1.4.2 Transportation Costs and Trade Impediments
			3.1.4.3 Relative Prices of Non-tradable Goods and the Balassa-Samuelson Effect
		3.1.5 Empirical Tests and Evidence on PPP
			3.1.5.1 Regression Tests of PPP
			3.1.5.2 Stationarity of Real Exchange Rates
			3.1.5.3 Comovements Between the Nominal Exchange Rate and Relative Price Levels
			3.1.5.4 Cross Country Panel Data Approach
	3.2 Covered Interest Rate Parity
		3.2.1 Rationale of CIRP
		Example
		Example
		3.2.2 CIRP and Arbitrage in the Presence of Transaction Costs
		Example
	3.3 Uncovered Interest Rate Parity and International Fisher Effect
		3.3.1 Uncovered Interest Rate Parity
		Example
		3.3.2 International Fisher Effect
	3.4 Links Between the Parities: A Summary
	References
4: Balance of Payments and International Investment Positions
	4.1 Balance of Payments
		4.1.1 Balance of Payments Accounts and Classification
		4.1.2 Balance of Payments Entries and Recording
		Examples
		4.1.3 The Balance of Payment Identity
	4.2 International Investment Position Statements and Analysis
	References
5: Open Economy Macroeconomics
	5.1 The Balance of Payments, National Accounts and International Economic Linkages
		5.1.1 National Accounts with an External Sector
		5.1.2 International Economic Linkages
	5.2 IS-LM in Open Economy Macroeconomics
		5.2.1 IS-LM Analysis
		5.2.2 IS-LM-BP Analysis
	5.3 Aggregate Supply and Assumptions on Price Attributes
	Reference
6: Balance of Payments Issues and Exchange Rate Movements
	6.1 The Elasticity Approach
	6.2 The Absorption Approach
	6.3 The Monetary Approach
	6.4 DIPI Analysis and DIDI Analysis
	References
7: The Mundell-Fleming Model
	7.1 Effects and Effectiveness of Monetary Policy and Fiscal Policy: Perfect Capital Mobility
		7.1.1 Monetary Expansion: Perfect Capital Mobility, Flexible Exchange Rates
		7.1.2 Fiscal Expansion: Perfect Capital Mobility, Flexible Exchange Rates
		7.1.3 Monetary Expansion: Perfect Capital Mobility, Fixed Exchange Rates
		7.1.4 Fiscal Expansion: Perfect Capital Mobility, Fixed Exchange Rates
	7.2 Effects and Effectiveness of Monetary Policy and Fiscal Policy: Imperfect Capital Mobility
		7.2.1 Monetary Expansion: Imperfect Capital Mobility, Flexible Exchange Rates
		7.2.2 Fiscal Expansion: Imperfect Capital Mobility, Flexible Exchange Rates
		7.2.3 Monetary Expansion: Imperfect Capital Mobility, Fixed Exchange Rates
		7.2.4 Fiscal Expansion: Imperfect Capital Mobility, Fixed Exchange Rates
	7.3 Monetary Policy Versus Fiscal Policy
		7.3.1 Effect on Income
			7.3.1.1 Flexible Exchange Rates
			7.3.1.2 Fixed Exchange Rates
		7.3.2 Effects on the Exchange Rate and Official Reserves
			7.3.2.1 Exchange Rates
			7.3.2.2 Official Reserves
		7.3.3 Effect on the Balance of Payments Current Account
	References
8: The Monetary Models
	8.1 Demand for Money in Two Countries and Foreign Exchange Rate Determination
	Examples
	8.2 Expectations, Fundamentals, and the Exchange Rate
	8.3 Rational Bubbles and Tests for the Forward-Looking Monetary Model
	8.4 The Dornbusch Model
		8.4.1 The Building Blocks of the Model and the Evolution Paths of the Exchange Rate and the Price
		8.4.2 Adjustments of the Exchange Rate and the Price and Overshooting of the Exchange Rate
	8.5 A Tale of Reverse Shooting and the Sensitivity of Exchange Rate Behavior
	8.6 The Real Interest Rate Differential Model
	8.7 Empirical Evidence on the Validity of the Monetary Models and Some Related Developments
	References
9: The Portfolio Balance Approach to Exchange Rate Determination
	9.1 Three Assets and Market Equilibria
	9.2 Effects of Monetary Policy Under the Portfolio Balance Approach
	9.3 Effects of Changing Economic Environments and Risk Perceptions
	9.4 Theoretical and Empirical Research and Developments in the Portfolio Balance Framework
	References
10: The Dynamic IS-LM-X Model of Exchange Rate Movements
	10.1 The Construct, Paradigm, Setting and Dynamics
	10.2 The Solution and Features of the Model
	10.3 An Illustrating Case
	References
11: Driver Currencies and Triangular Cross-Border Effects
	11.1 The Triangular Analytical Framework
	11.2 Driver Currencies
	11.3 Triangular Cross-Border Effects: PPP
		11.3.1 The Analytical Framework
		11.3.2 Mechanisms and Channels of Triangular PPP
		11.3.3 Empirical Tests and Evidence
	References
12: Global Derivatives Markets
	12.1 Global Use of Derivatives: Current State, Trends and Changing Patterns
	12.2 Phenomenal Growth in Global Derivatives Markets: A Decade Ago
	12.3 Organized Derivatives Exchanges, Contract Specifications and Trading
	12.4 Use of Derivatives, Investor Behavior, Risk Management Concept and Risk Management Methods
13: Currency Futures
	13.1 Futures Contracts and Trading
	Example
	13.2 Futures Quotes
	13.3 Pricing of Futures Products
	Examples
14: Currency Options
	14.1 Option Basics
	Examples
	14.2 Option Terminology and Quotes
	14.3 Currency Option Specifics
	Examples
	14.4 Option Pricing: The Binomial Tree Approach
	Examples
	Examples
	14.5 Option Pricing: The Black-Scholes Model
	Examples
	14.6 Notes
	References
15: Currency Swaps
	15.1 Basics of Swaps
	15.2 Currency Swap Specifics
	15.3 Swapnotes
	Reference
16: Transaction Exposure
	16.1 Introduction to Transaction Exposure and Its Management
	16.2 Forward Hedge and Futures Hedge
	16.3 Money Market Hedge
	16.4 Option Hedge
17: Economic Exposure and Accounting Exposure
	17.1 Measuring Economic Exposure
	17.2 Managing Economic Exposure
	17.3 Measuring Accounting Exposure
	17.4 Managing Accounting Exposure
18: Country Risk and Sovereign Risk Analysis
	18.1 Factors of Influence on Country Risk
	18.2 Country Risk Analysis and Ratings
	18.3 Sovereign Risk Analysis and Ratings
	References
19: Foreign Direct Investment and International Portfolio Investment
	19.1 Recent Profiles of Foreign Direct Investment
	19.2 FDI Types and Strategies
	19.3 International Portfolio Investment
	References
20: Dynamic Global Positioning Strategy
	20.1 The Pendulum Gravity Model of FDI and Trade
		20.1.1 The Model with Pendulum Gravity
		20.1.2 Empirical Studies and Evidence
	20.2 Development Stages and Trade-FDI Cycles and Phases
		20.2.1 Relationships Between Trade and FDI: From Static Analysis to Evolutionary Dynamics
		20.2.2 IDP
		20.2.3 SCP Conjecture
	References
Name Index
Subject Index