[Economy Lecture] Capital Account Convertibility, Balance of Payment, Rupee Devaluation, Eurozone Quantitative Easing & Greece Anti-Austerity

1. Prologue
2. L3/P1: Balance of Payment (BoP) & Current Account Deficit
3. L3/P2: Rupee Devaluation & Exchange rate regimes
4. L3/P3: Capital account Convertibility & Tarapore Committee
5. L3/P4: ECB quantitative easing & Greece Anti-Austerity

Prologue

• Sixth lecture was done on 20^th February 2015, and uploaded on youtube. Total ~2:30 hours but I’ve split it into four parts.
• PowerPoint of the lecture, available at Mrunal.org/Download
• Medium of instruction- Hindi.
• English version not possible for the moment, because I’m required to teach at this batch, in Hindi/Gujarati only. Besides, same content is available in English-text articles and English PPTs on the site.

L3/P1: Balance of Payment (BoP) & Current Account Deficit

• Brief recap of the previous lectures
• What is balance of payment (BoP)? Definition, methodology.
• How is World’s balance of payment zero?
• How is India’s balance of payment zero? And if so, why did we have a balance of payment crisis in 1991?
• Two components of BoP: current account and capital account
• Components current account balance: visible and invisible part.
• Current Account: Services, income, transfer, gifts donations and remittances
• Concepts: Balance of trade, trade deficit and trade surplus. Major imports and exports of India.
• Calculating current account deficit and current account surplus.
• Difference between FDI and FII
• What is forex reserves? How is it built? What are the components of forex reserves?

http://youtu.be/oEq9VxPKLqI

L3/P2: Rupee Devaluation & Exchange rate regimes

• if $1=50 or $1=60: who decides this exchange rate and how?
• Fixed exchange rate regime: mechanism and limitations.
• Floating exchange rate regime: mechanism limitations.
• Difference between devaluation and depreciation of Rupee
• Difference between revaluation and appreciation of rupee?
• Historic trend of Indian rupee’s fall/weakening against US dollar
• How does devaluation of the currency boost its exports?
• Difference between NEER and REER? How does it help determining whether currency is undervalued or overvalued?
• “Managed” floating extended rate regime.

http://youtu.be/oRaSH1Zd4qQ

L3/P3: capital account convertibility

• What is “convertibility”? Why do we need to impose quantitative restrictions on convertibility between Indian rupee and foreign currency?
• What is “full” current account convertibility?
• What is capital account convertibility? Why does India have “partial” capital account convertibility?
• Under FEMA, What are the quantitative restrictions put on current account and capital account convertibility?
• What is capital account liberalization?
• Features of Liberalized remittance scheme (2004)?
• Arguments in favour and against of capital account convertibility and capital account liberalization.
• How did full capital account convertibility lead to collapse of East Asian economies in 1997?
• Recommendations of S.S.Tarapore Committee and why time not yet ripe for implementation of full capital account convertibility in India.

http://youtu.be/oTmHN3RVeT8

L3/P4: ECB quantitative easing & Greece Anti-Austerity

• Why does European Central bank (ECB) want to begin quantitative easing or Eurozone bond purchase program from March 2015?
• Mechanism of ECB-QE.
• Arguments in favour and against quantitative easing by ECB.
• How does it affect India’s economic interests?
• What is the Greece sovereign debt crisis?
• Why has ECB refused to incorporate Greece Bond purchase in its QE program?
• Why do Greek Leftist party “Syriza” and its leader Alexis Tsipras are pursuing “Anti-austerity” campaign?
• Possible implications if Greece leaves Eurozone?

http://youtu.be/MblO4eTeP3A