Transcript Slide 1

Germany, Greece, Japan
STRT 571 – Quinn/Vreeland
Germany
Modes of Entry
Checklist of Considerations
Financial
Capital Requirements
Profit Potential
Financial Risk
Managerial
Management Requirements
Operational control
Speed of entry
Market
‘effective customer demand
Competitors
Foreign, domestic
Export platform?
Growth prospects
Technology
Technology Risk
Scale Economies
Product and Process
Improvements
Regulatory/Political
Currency Risk
Protection of Intellectual
Property
Expropriation Risk
Agreements enforced?
Corruption
Exporting/
License/
Sourcing/
Franchise
FDI- JV
FDI-Subsidiary
how are inflation and exchange rates related?
Capital mobility (open flows to FDI, e.g.)

Exchange Rates
Regimes
Fixed/Floating
Domestic
Monetary
&
Fiscal Policy
Management
(inflation, employment)
key determinants of XR
• PPP differences – ‘law of one price”
-long run, “Walmart” effect, $9 apples
Current account deficits or surpluses
• Presence or absence of capital controls
-China, extensive outward restriction
-US, UK = zero restrictions (+/-)
• Government monetary policies/inflation
-interest rates (Brazil case)
• Fiscal policies (debt or surplus); gov debt
• Investor expectations (‘VaR’; sharks; ir parity)
• Government exchange rate ‘regimes’
• Interest rate parity (covered vs uncovered)
• a*b*c*d*e*f*g = extremely complicated calculations
Q’s
• Germany, the ERM, and
Central Banks
• 1) How is Germany paying for
the reunification of the West
and East, and why?
• 2) the Bundesbank must
choose on July 16, 1992 what
to do about its core interest
rate. What are the arguments
for and against raising interest
rates?
• 3) How did George Soros
make a billion USD?
• 4) What are the twin goals of
the U.S. Federal Reserve?
BoP conventions (ex. 6 in Germany; ex’s 3&4 in
Japan)
always follow who gets the cash; cash = +
• Capital/Financial accounts (FDI, portfolio, transfers of
ownership of fixed assets)
• Capital transferred out of a country is an asset, but is
noted in the BoP as a debit (because the cash left the
country)
• Capital transferred in is a liability, but is noted as a credit
(because cash entered the country)
• the current + capital/financial accounts should = zero,
but rarely do. China, e.g., in 2000 had a current account
surplus of $20.5 billion, a $2 billion ‘surplus’ (=liabilities)
in capital accounts, & $12 billion in errors and omissions
• Size of ‘errors and omission” indicates capital flight or
unrecorded migrant remissions, among other things
from JRV: “Answer: Democracy”
Few democracies
Growing #’s of democracies
Fixed
exchange
rates
Degree of
global
capital
mobility
+
Open
capital
flows
1870
Interwar period
Fixed
exchange
rates
Floating
exchange
rates
+
+
Capital
controls
Open
capital
flows
1944
1971-3
Mr. Major and Black Wednesday
• Q: “Are you satisfied or dissatisfied with the way Mrs Thatcher / Mr
Major / Mr Blair is doing her / his job as Prime Minister?”
• MORI polls
•
Thatcher Thatcher Major Blair Blair Blair
•
79-83
83-87
92-97 94-97 97-01 01-04
•
•
•
•
•
•
•
•
•
No. of monthly polls
42
Number of polls
where satisfaction
12
greater than
dissatisfaction
Number of polls
29
where dissatisfaction
greater than satisfaction
% negative
69%
•
http://www.ipsos-mori.com/publications/mag/tony-blair-10-years-on.shtml
43
60
32
48
35
8
5
32
40
8
34
55
0
7
25
79%
92%
0% 15% 71%
UK General Election 1997
Candidates
Party
Elect Gain
Labour
418
147
Cons.
165
0
46
30
LibDems
Loss
Votes
Net
0
% of
tot
al
Net %
+ 147
63.4
+8.8
178 -
178
25.0
-11.2
2
+ 28
7.0
-1.0
Current accounts, 2008
Greece “restated” by IMF = -$50.1 billion
Current Account Balances, 2009 and 2010 (est.)
Country
China
Japan
Germany
Netherlands
Norway
Russia
Kuwait
Switzerland
Taiwan
Rank
1
2
3
4
5
6
7
8
9
2009
371.504
96.891
94.248
55.648
51.41
45.417
33.74
29.731
28.216
2010
451.177
105.612
120.16
56.171
63.248
62.037
47.827
35.477
30.879
Finland
37
1.309
4.986
Hungary
149
-3.665
-4.337
Portugal
173
-21.679
-22.099
India
174
-27.491
-33.628
Australia
175
-29.89
-54.743
France
176
-30.424
-38.934
Greece
177
-33.756
-31.813
Canada
178
-34.309
-26.482
United Kingdom
179
-44.735
-45.811
Italy
180
-52.42
-50.919
Spain
181
-86.701
-68.958
United States
182
-369.787
-324.7
International Monetary Fund, World Economic Outlook Database, October 2009
Current Account Balances, 2009 and 2010 (est.)
(as % of GDP)
Country
Timor-Leste
1
Taiwan
14
China
15
Germany
33
Japan
39
Finland
47
United Kingdom
67
India
71
Italy
74
United States
75
Hungary
79
Greece
138
Iraq
176
Maldives
177
Antigua and Barbuda
178
St. Vincent and the Grenadines
179
São Tomé and Príncipe 180
Dominica
181
Liberia
182
2009
66.248
7.896
7.808
2.913
1.919
0.54
-2.035
-2.212
-2.509
-2.592
-2.95
-9.98
-28.431
-29.024
-29.44
-29.5
-31.123
-32.4
-41.843
2010
49.351
8.017
8.572
3.613
2.036
1.972
-1.947
-2.51
-2.344
-2.208
-3.276
-9.025
-15.163
-22.869
-27.883
-31.6
-27.96
-28.6
-60.662
A Greek Tragedy?
Keep an eye on Finland and
Hungary too!
Japan
Greece
US
Germany
Italy
EU
India
China
Brussels, 11 April 2010
Statement on the support to Greece by Euro area
Members States
•
•
•
•
Following the statement by the Heads of State and Government of the Euro
area on 25 March, Euro area Members States have agreed upon the terms
of the financial support that will be given to Greece, when needed, to
safeguard financial stability in the Euro area as a whole.
Euro area Members States are ready to provide financing via bilateral loans
centrally pooled by the European Commission as part of a package
including International Monetary Fund financing. The Commission, in liaison
with the ECB, will start working on Monday April 12th, with the International
Monetary Fund and the Greek authorities on a joint programme
The programme will cover a three-year period. The euro area Member
States are ready to contribute for their part up to € 30 billion in the first
year to cover financing needs in a joint programme to be designed with and
cofinanced by the IMF.
A charge of 300 basis points will be applied. A further 100 basis points
are charged for amounts outstanding for more than 3 years. In conformity
with IMF charges, a one-off service fee of maximum 50 basis points will be
charged to cover operational costs. For instance, as of April 9th, for a three
year fixed-rate loan granted to Greece, the rate would be around 5%.
Estimates of unit labor cost in Indian and US firms from data in the case
India –
Infosys, Wipro
Sales per employee, Q/L
Programmer wages, w
Unit labor cost = w ∙ (L/Q)
US –
Covansys, Keane
$50-51,000
$96-99,000
$11,000
$55,000
$11,000/$50,000
= $0.22 of labor
cost per dollar of
output
$55,000/$96,000
= $0.56 of labor
cost per dollar of
output
Data from “Indian Software Industry in 2002, p. 11 for wage rates and Exhibit 10 for productivity data
36
Hungarian parliamentary election, 2006
All 386 seats to the Országgyűlés
9 and 23 April 2006
Second Party
Conservatives
Leader
Viktor Orbán
Party
Fidesz
Last election
188
Seats won
164
Seat change
-24
Popular vote
Percentage
43.20%
First Party
Socialists
Ultra-nationalists
Attila Mesterházy[1]Gábor Vona
MSZP
JOBBIK
178
0
190
0
12
0
42.20%
1.70%
Hungarian parliamentary election, 2010
All 386 seats to the Országgyűlés
11 and 25 April 2010
First party
Conservatives
Leader
Viktor Orbán
Party
Fidesz
Last election
164
Seats won
206
Seat change
42
Popular vote
2,706,292
Percentage
52.73%
Second party
Third party
Socialists
Ultra-nationalists
Ference Gyurcasany
Gábor Vona
MSZP
JOBBIK
190
0
28
26
−162
26
990,428
855,436
19.30%
16.67%
Hungarian parliamentary election, 2010
All 386 seats to the Országgyűlés
11 and 25 April 2010
First party
Conservatives
Leader
Viktor Orbán
Party
Fidesz
Last election
164
Seats won
206
Seat change
42
Popular vote
2,706,292
Percentage
52.73%
Hungarian parliamentary election, 2006
All 386 seats to the Országgyűlés
9 and 23 April 2006
Second Party
Conservatives
Leader
Viktor Orbán
Party
Fidesz
Last election
188
Seats won
164
Seat change
-24
Popular vote
Percentage
43.20%
Second party
Third party
Socialists
Ultra-nationalists
Ference Gyurcasany
Gábor Vona
MSZP
JOBBIK
190
0
28
26
−162
26
990,428
855,436
19.30%
16.67%
First Party
Socilaists
Ultra-nationalists
Attila Mesterházy[1]Gábor Vona
MSZP
JOBBIK
178
0
190
0
12
0
42.20%
1.70%
Q’s
• Japanese automakers:
• 1) What challenges did the
leading Japanese automakers
face in 1984-1985, and again
in 1994-1995? Why did these
challenges emerge?
• 2) How well did the Japanese
automakers face the
challenges in 1984-85? What
will they have to do differently
in 1994-95?
• 3) What lessons can other
firms take from the response of
Japanese firms to Endaka?
• 4) what lessons for China
Japanese reserves
source: IMF
June 2009
A. Official reserve assets
1,019,175.00
(1) Foreign currency reserves (in convertible foreign currencies)
988,498.00
(a) Securities
914,522.00
of which: issuer headquartered in reporting country but located abroad
(b) total currency and deposits with:
(i) other national central banks, BIS and IMF
(ii) banks headquartered in the reporting country
73,976.00
6,680.00
19,724.00
of which: located abroad
(iii) banks headquartered outside the reporting country
47,572.00
of which: located in the reporting country
47,572.00
(2) IMF reserve position
4,332.00
(3) SDRs
2,971.00
(4) gold (including gold deposits and, if appropriate, gold swapped)5
—volume in millions of fine troy ounces
(5) other reserve assets (specify)
22,991.00
24.60
383.00
—financial derivatives
—loans to nonbank nonresidents
—other
383.00
Share of US car and truck markets
50.0
45.0
40.0
35.0
Chrysler
Ford
GM
Honda
Nissan
Toyota
25.0
20.0
15.0
10.0
5.0
0.0
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
% of Market
30.0
source: Ward's Automotive