International Trade and Exchange Rates

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International Trade and Exchange Rates

• FOMC PRESENTATIONS
• SPRING 2007
• Paul Ackerman, Nicole Eovino, Kimberly Matheis,
  Nate Simon, and Ryan Wilkey

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International Trade

• U.S.has the most advanced economy in the world
• U.S. conducts over half of its trade with only 4
  partners
  
• Total trade between U.S. and top 4 partners
  totaled 1.4 trillion in 2006

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Major Trading Partners
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Canada

• Exports to Canada - passenger cars, parts and
  accessories for passenger vehicles, trucks, buses
  and special purpose vehicles.
  
• Imports - passenger cars, crude oil and natural
  gas
  
• From 2004-06, trade increased 19.7
• 18.5 of total trade in 2006

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Mexico

• Exports - electric apparatus, car parts and
  accessories, computer accessories
  
• Imports - car parts and accessories, crude oil,
  passenger cars
  
• Over 3 year period, trade increased 25.7
• In 2006, 11.5 total trade

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China

• Exports - semiconductors, soybeans, industrial
  machines
  
• Toys, computer accessories, other household goods
  
  
• Trade up 48.2 over 3 year period
• 2006 - 11.9

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Japan

• Exports - civilian aircraft, semiconductors,
  medicinal equipment
  
• Imports - passenger cars, televisions and other
  video equipment, car parts and accessories
  
• Total trade up 12.9 since 2004
• In 2006, 7.2
• Down 10 since 2004

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International Trade

• There are two different types of accounts that
  measure trade
  
• Current Account - Goods and Services
• Financial Account - Financial Transactions

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Current Account
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Current Account and Financial Account

• CA Measures Good and Services
• CA in 2006 for US
• -862.3 Billion
• Lowest of all 163 countries surveyed
• FA measures financial transactions
• Opposite of CA, CA FA 0

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Forecasting Utilizing Regression
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US Census Bureau - Trade

• Balance of Payments - US Goods and Services
• In 2006
• -763.58 Billion
• Rapidly declining since1975

• Increasing deficit numbers do not necessarily
  correlate to hurting the economy
  

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Monetary Policy and International Trade

• Financial conditions- Interest Rates
• Aggregate supply and demand
• U.S. trade deficit and changes in global markets

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Exchange Rates

• U.S. Dollar compared to the Yen, Euro, and
  Canadian dollar
  
• Trends of the exchange rate

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Exchange Rates- Euro
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Exchange Rates-Yen
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Exchange Rates-Canadian Dollar
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Monetary Policy and Exchange Rates

• Exchange rates as a possible economic indicator
• Monetary Policy not based on exchange rates
• Exchange Stabilization Fund, ESF, with the U.S.
  Treasury

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Policy Recommendation

• Keep interest rates the same
• If condition worsens- consider lowering interest
  rate at the following meeting.