Instructor’s Manual
to accompany
Seventh Edition
International Money
and Finance
Michael Melvin
Instructor’s Manual
to accompany
International Money
and Finance
Seventh Edition
Michael Melvin
ADDISON-WESLEY
An imprint of Addison Wesley Longman, Inc.
Boston, Massachusetts  Menlo Park, California  New York  Harlow, England
Don Mills, Ontario  Sydney  Mexico City  Madrid  Amsterdam
Instructor’s Manual to accompany Melvin, International Money and Finance, Sixth Edition
Copyright  2004 Addison Wesley Longman, Inc.
All rights reserved. Printed in the United States of America. No part of these materials may be used or
reproduced in any manner whatsoever without written permission from the publisher, except testing
materials, transparencies, and transparency masters may be copied for classroom use. For information,
address Addison Wesley Educational Publishers Inc., One Jacob Way, Reading, Massachusetts 018673999.
ISBN: 0-321-06272-8
1 2 3 4 5 6 7 8 9 DPC 02 01 00 99
CONTENTS
INTRODUCTORY NOTE
vii
CHAPTER 1
THE FOREIGN EXCHANGE MARKET
1
CHAPTER 2
THE BALANCE OF PAYMENTS
4
CHAPTER 3
PAST AND PRESENT INTERNATIONAL MONETARY ARRANGEMENTS
6
CHAPTER 4
FORWARD-LOOKING MARKET INSTRUMENTS
9
CHAPTER 5
EXCHANGE RATES, INTEREST RATES, AND INTEREST PARITY
11
CHAPTER 6
FOREIGN EXCHANGE RISK AND FORECASTING
13
CHAPTER 7
INTERNATIONAL INVESTMENT AND CAPITAL FLOWS
15
CHAPTER 8
PRICES AND EXCHANGE RATES: PURCHASING POWER PARITY
17
CHAPTER 9
DETERMINANTS OF THE BALANCE OF TRADE AND PAYMENTS
19
CHAPTER 10
EXCHANGE RATE DETERMINATION
21
CHAPTER 11
IMPORT AND EXPORT FINANCING
23
CHAPTER 12
FINANCIAL MANAGEMENT OF THE MULTINATIONAL FIRM
25
CHAPTER 13
INTERNATIONAL BANKING, DEBT, AND RISK
27
CHAPTER 14
MACROECONOMIC POLICY IN THE OPEN ECONOMY
29
INTRODUCTORY NOTE
This manual is designed to accompany the sixth edition of International Money and Finance by Michael
Melvin. The manual is intended for instructors wishing to utilize the end-of-chapter exercises as student
assignments. Suggested answers are provided for each chapter along with a few helpful hints for adding
lecture material that will reinforce the basic message of the text. Mr. Ali Kutan provided many of the
answers contained in these pages. Michael Melvin welcomes any suggestions for improving the text or
classroom presentations of international finance. He may be contacted at: Department of Economics,
Arizona State University, Tempe, AZ 85287 or email at mmelvin@asu.edu.
ADDISON-WESLEY
Addison-Wesley is an imprint
of Addison Wesley Longman