2 Economics

2023年CFA二级大纲经济学科目，共有3个module，重要部分（如公式，结论等）已标记

Economics

• Currency exchange rates: Understanding Equilibrium Value
  • Bid-Ask Spread
    • 表示方法：A/B, price currency/base currency
    • 实例：CNY/USD=6.9-7.0
      • bid price: 6.9
      • ask(offer) price: 7.0
      • spread = ask price - bid price
    • The factors that influence the size of the bid–offer spread quoted
      • In the interbank market: liquidity
        • The currency pair
        • The time of day
        • Market volatility
      • To dealers' clients in the FX market
        • The bid–offer spread in the interbank foreign exchange market
        • The size of the transaction: 委托金额越大，spread越大
        • The relationship between the dealer and the client: VIP客户较小
  • Cross Rate and Triangular Arbitrage
    • Cross rate
      • A，B两个货币都有跟C的标价，计算A/B
      • 步骤
        • 判断乘除
          • 相乘同边，相除对角，乘小除大
    • Triangular arbitrage
      • 三种货币相互有市场标价，A换B B换C C换A，判断盈亏
      • 步骤
        • 画三角图，标方向
          • 分析乘除
            • 使用实践法，划出路线，找到套利回报
  • Forward contract
    • Spot and forward rate
      • Spot rate: 两日内进行兑换的汇率
      • Forward rate: 约定在未来某一天按照某一固定价格兑换的汇率
    • Forward premium and discount
      • Forward premium 远期升水，F-S>0，
      • Forward discount 远期贴水， F-S<0，
      • Forward rate=spot rate+0.01%*bp; 1bp（basic points） = 0.01%
    • Mark-to-market value
      • 定义: reflects the profit (or loss) that would be realized from closing out the position at current market prices
      • 公式
        • FP t = forward price (to sell base currency) at time t
        • FP 0= forward price specified in the contract (to buy the base currency)
        • days = number of days remaining to maturity of the forward contract (T − t)
        • r = interest rate of price currency
  • The International Parity Relationships
    • Interest Rate Parity（IRP）
      • Covered Interest Rate Parity
      • Uncovered Interest Rate Parity
      • Forward Rate Parity
        • Forward rate = expected future spot rate (F=E(S1))
        • • 注: Over the longer term, uncovered IRP and forward rate parity have more empirical support
    • International Fisher Relation
      • The Fisher Effect
      • International Fisher effect
    • Purchasing Power Parity (PPP)
      • Absolute PPP (law of one price)
      • Relative PPP
        • ex-post PPP
        • ex-ante PPP
    • 关系
  • FX Carry Trade
    • 表示方法: X/Y，X currency high-yield，Y currency low-yield
    • Risks of the carry trade
      • The carry trade is profitable only if uncovered interest rate parity does not hold over the investment horizon
      • The return distribution of the carry trade is not normal, and it is characterized by negative skewness and excess kurtosis
    • Risk management in carry trade
      • Volatility filter: If FX volatility were to rise above a higher threshold, then a signal would be generated that those positions should be closed
  • Balance-of-Payments Accounts
    • BOP
      • 经常项目（账户）:对实际资源在国际间流动的行为进行记录
        • 贸易收支（有形贸易收支）
        • 劳务收支（无形贸易收支）
        • 经常性转移收支
      • 资本和金融项目（账户）:对资产所有权在国际间流动行为进行记录
        • 资本项目：资本性质的无偿转移，如债务减免、移民转移
        • 金融项目
          • 概念：记录因国际资本流动所形成的所有交易，涉及到对外资产和债务的变动
          • 分类
            • 长期资本(long-term capital)：期限在一年以上或未规定期限的资本(如股票所代表的股权资本)
            • 短期资本(short-term capital)：期限为一年或一年以下(包括见票即付)的资本
      • 平衡项目（账户）
        • 分配的特别提款权(Allocation of Special Drawing Right)
        • 官方储备(Official Reserves)，又称国际储备资产
        • 错误与遗漏(Errors and Omissions)，又称“统计误差”(Statistical discrepancy)
    • Mechanisms influence the path of exchange
      • In current account
        • The flow supply/demand channel (J-curve)
        • The portfolio balance channel
        • The debt sustainability channel
      • In capital account
        • Capital flows into a country→demand for that country's currency increases →appreciation
        • Excessive capital inflows into emerging markets will lead to currency crisis
        • 长、短期实际汇率关系
  • Exchange Rate Determination Models
    • Mundell-Fleming model
      • Flexible exchange rate+High capital mobility
      • Flexible exchange rate+Low capital mobility
      • Fixed exchange rate+High capital mobility
        • Impossible triangle
        • Expansionary monetary polic:y ineffective
        • Expansionary fiscal policy: lead to economic overheating
    • The monetary approach: only take into account the effect of monetary policy onexchange rates
      • Pure monetary model
      • Dornbusch overshooting model
    • The asset market (portfolio balance) approach
  • Exchange Rate Management
    • Capital flow surges can be both a blessing and a curse
    • The objectives of capital controls or central bank intervention in FX markets
      • Ensure that the domestic currency does not appreciate excessively
      • Allow the pursuit of independent monetary policies without being hindered by their impact on currency values
      • Reduce the aggregate volume of inflow of foreign capital
    • Effectiveness: central banks in developed market countries are relatively ineffective at intervening in the foreign exchange markets due to lack of sufficient resources
    • Currency crisis
• Economic Growth
  • Preconditions for Growth
    • Savings and investment
    • Financial markets and intermediaries
    • Political stability, rule of law, and property rights
    • Education and health care systems
    • Tax and regulatory systems
    • Free trade and unrestricted capital flows
  • Economy Sustainable Growth, Stock Market, fixed income
    • potential GDP
    • Stock market
      • P = GDP*(E/GDP)*(P/E)
        • P: the aggregate value (price) of equities
        • E: aggregate earnings
      • %∆P = %∆ GDP + %∆(E/GDP) + %∆(P/E)
      • Over short to immediate horizons: all three of these factors contribute to appreciation or depreciation of the stock market
      • Over the long run
        • %∆(E/GDP)=0
        • %∆(P/E)=0
        • %∆P=%∆GDP
        • Higher rates of potential GDP growth
          • Higher real interest rates
          • Higher expected real asset returns
    • Fixed income analysis
      • A higher rate of potential GDP growth improves the general credit quality of fixed income securities
      • Monetary policy decisions
      • Credit rating agencies use it to evaluate the credit risk of sovereign debt or government-issued debt
      • Government budget
  • Cobb-Douglas production function
    • 形式
      • Y: the level of aggregate output
      • L: the quantity of labor/ number of workers/hours worked
      • K: an estimate of the capital services
      • α: the shares of output (factor shares) paid by companies to capital (0≤α≤1)
      • 1-α: the shares of output (factor shares) paid by companies to labor
      • A: a multiplicative scale factor referred to as total factor productivity (TFP)
    • 特点
      • Constant returns to scale
      • Diminishing marginal productivity
        • α close to zero: diminishing marginal returns to capital are very significant
        • α close to one: the impact of diminishing marginal is relatively small
    • 变形
      • • 各部分说明
          • y = Y/L; the output per worker or (average) labor productivity
          • k = K/L; the capital- to- labor ratio
        • 影响因素
          • Output per worker (labor productivity)
            • A: Technology or TFP
            • k: Amount of capital available for each worker (capital-to-labor ratio)or capital deepening
          • Capital deepening: an increase in the capital-to-labor ratio, reflected by a move along the production function. However, once it becomes very high, further additions to capital have relatively little impact on per capita output
            • Developed countries: gain little from capital deepening and must rely on technological progress for growth in productivity
            • Developing nations: capital deepening can lead to at least a short-term increase in productivity
          • Technological progress: causes a proportional upward shift in the entire production function
  • Other factors affect the economy growth
    • Natural resources
      • Resource curse
      • Dutch disease: currency appreciation driven by strong export demand for resources makes other segments of the economy, in particular manufacturing, globally uncompetitive
    • Labor Supply
      • Population growth
      • Net migration
      • Average hours worked: The long-term trend in average hours worked has been toward a shorter workweek in the advanced countries
    • Human capital: increased through investment in education and on- the- job training
    • Physical capital
      • ICT investment: physical capital spending on information, computers, and telecommunications equipment ,making a significant contribution to increasing the rate of economic and productivity growth
      • Non- ICT capital spending: capital deepening; have less impact on potential GDP growth
      • Public Infrastructure
    • Technological development
  • Economic Growth Theories
    • Classical growth theory
      • Developed by: Thomas Malthus(1798)
      • 主要观点: Population explosion with limited resources will stop economic growth
      • 结论: In the long run, even with technological progress the standard of living is constant over time, there is no growth in per capita output
      • The reasons why the model failed
        • The link between per capita income and population broke down
        • Technological progress has been rapid enough to more than offset the impact of diminishing marginal returns
    • Neoclassical growth theory
      • 主要观点
        • The economy is at equilibrium when the output-to-capital ratio is constant
        • ∆k/k=∆y/y
      • 公式(θ: growth rate in technology)
        • Sustainable growth of output per capita (or output per worker)(g*)
        • Sustainable growth rate of output (G*)
    • Endogenous growth theory
      • Self-sustaining growth, which is generated by saving and investment decisions, emerges as a natural consequence of the model and the economy does not necessarily converge to a steady state rate of growth
      • No diminishing marginal returns to capital and permanently increases the rate of economic growth
      • The developed countries can continue to grow as fast as or faster than the developing countries, so there is no reason to expect convergence of income over time
  • Convergence debate
    • Absolute convergence: developing countries, regardless of their particular characteristics, will eventually catch up with the developed countries and match them in per capita output
    • Conditional convergence:convergence is conditional on the countries having the same saving rate, population growth rate, and production function
    • Club convergence
      • Only rich and middle-income countries that are members of the club are converging to the income level of the richest countries in the world
      • Poor countries can join the club if they make appropriate institutional changes
• Economics of Regulation
  • Economic Rational for Regulation
    • Economic Rational for Regulation
      • Informational frictions: adverse selection; moral hazard
      • Externalities
      • Weak competition
    • Regulation of Financial Markets
      • Disclosures
      • Prudential supervision
    • Regulation of Commerce
      • Consumer protection
      • Commercial law
      • Antitrust
    • Antitrust Regulation
      • Promote competition
      • Typically required for mergers and acquisition
  • Classification of Regulations and Regulators
    • Classification of Regulations and Regulators
      • Regulators
        • Legislative bodies
        • Government agencies
          • Statutes: reflecting laws enacted by legislative bodies
          • Administrative regulations or administrative law: rules issued by government agencies or other regulators
          • Judicial law: interpretations of courts
        • Independent regulators: do not rely on government funding and are often given a degree of autonomy in terms of decision making
        • Courts
      • Industry self-regulatory bodies
        • 特点
          • May be subject to pressure from their members
          • Derive authority from their members
          • Have the power to exclude or expel parties from being members
          • Certain entry requirements (such as training or ethical standards) may be imposed
        • 类型
          • Self-regulating organizations (SROs)
            • SROs differ from standard industry self-regulatory bodies in that they are given recognition and authority
            • SROs are funded independently
          • Non-self regulating organizations
      • Outside bodies
    • Regulatory Interdependencies
      • Regulatory capture theory: regulation can sometimes enhance and work to the benefit of the interests of the regulated
      • Regulatory competition: Regulators may compete to provide a regulatory environment designed to attract certain entities
      • Regulatory arbitrage: Entities may identify and use some aspect of regulations that allows them to exploit differences in economic substance and regulatory interpretation or in foreign and domestic regulatory regimes to their benefit
    • Regulatory Tools
      • Price mechanisms
      • Restricting some activities
      • Mandating some activities
      • Providing public goods
      • Financing private projects
  • Analysis of Regulation
    • Costs
      • Implementation costs that were unanticipated (e.g., if it turns out more compliance lawyers need to be hired than originally thought)
      • Indirect costs because of unintended consequences
    • Assessment of the likelihood of regulatory change
    • Assessment of the impact of regulatory change on a sector
      • Impact on revenues
      • Cost impact
      • Business risk