试听180秒034：Are You a Winner or Loser When Exchange Rates

【提示】

本课程是中英双语授课，您可以点击“专辑--节目”选择中文或英文课程进行收听，英文课程由蒂莫西·泰勒本人讲述，对应中文内容是由专业人士完成。谢谢您的订阅，希望您能有所收获。

【音频英文稿】

Hello, Himalaya subscribers. My name is Timothy Taylor.

Today, we're going to discuss, are you a winner or loser when exchange rates move? Let's start with a question, as we often do. Do you gain when the price for oil goes up, or do you lose? Well, the answer might seem pretty obvious. When oil prices go up, consumers often pay more directly. It costs more, uh, to heat their homes. The price of gasoline probably goes up, too. It costs consumers more indirectly also, because the cost of production for companies that use oil as an input goes up.

And as we discussed earlier, a higher price of an input production is a negative shock to supply that will tend to push up the price of other things consumers buy as well. Now, this is all true, but it's also just from one perspective, the perspective of a consumer. But we know that in the circular flow of the economy, there are other important loops like labor markets and financial markets. What if you have a job working for one of the big oil companies like China Petroleum and Chemical Corporation, which in English is often referred to as Sinopec or China National Petroleum Corporation，in English often referred to by its initials CNPC. If you're working for one of these companies, higher oil prices means more demand for labor at these companies, probably higher pay if you have the skill and experience, or maybe a better chance of being hired in the first place.

Or imagine that you have invested money in the stock of Sinopec or CNPC. The higher price of oil probably means higher profits for these companies that will tend to make the stock price go up. So let's go back to the original question. Do you gain when prices for oil go up? Or do you lose? And the answer now seems a little more complicated. It depends. It depends on whether you are mainly a consumer of oil or mainly working in the oil industry, or mainly investing in oil companies. Now, that answer isn't a big surprise if you think about it. No matter what the good or service, it will always be true that sellers like a higher price and buyers like a lower price. The equilibrium in a market is a balance between the forces of supply and the forces of demand. But even at equilibrium, it will always be true. Sellers would rather have a higher price, and buyers would rather have a lower price.

In this lecture, we want to talk about exchange rates. So let's start off with the basic question, what is an exchange rate? And then we'll do two follow-up questions: Who wins or loses from exchange rate movements? And why might a country want a weaker currency? Our first question is: what is an exchange rate?

And the answer is that an exchange rate is just a price. It's not the price of a good or service, but the price for buying another currency. In mid-2018, for example, one hundred Chinese yuan could be exchanged for about fifteen U.S. dollars, or a hundred yuan could be exchanged for about thirteen euros. You can go through the list of just about any currency in the world. A hundred yuan would have bought about four hundred and fifty Argentinian pesos, or about two hundred South African rand. Now we're not always used to thinking about an exchange rate as a price, but that's really what it is.

With most prices, we just say the price goes up or goes down. But for exchange rates, it's common to use some different terms when the exchange rate rises or falls. For example, you'll sometimes hear that in exchange rate has gotten stronger or weaker. What does that mean? Well, a stronger Chinese yuan means that it buys more of other currencies. For example, if instead of a hundred yuan buying fifteen dollars U.S. it bought twenty dollars U.S. then the yuan would be stronger. A weak Chinese yuan means that it buys less of other currencies. For example, if instead of a hundred yuan buying fifteen dollars U.S. it only bought twelve dollars U.S., then the yuan will be weaker.

Another set of terms often heard is that a currency is appreciating or depreciating. Appreciating means the same as stronger. It means a currency can buy more of other currencies. Depreciating means the same as weaker: it means a currency would buy less of other currencies. A key factor holding your mind is that if the exchange rate for one currency gets stronger, the exchange rate for the other currency in the transaction has to get weaker. And this should make some sense. If a fixed quantity of Chinese yuan buys more in U.S. dollars, then a fixed quantity of U.S. dollars will buy less in Chinese yuan.

Let's move to our second question. Who wins and loses from exchange rate movements. And let's talk about several different groups here. Well, first talk about tourists, which often helps, because people can imagine themselves in that situation. We'll talk about importers and exporters, and we'll talk about international financial investors. But the basic lesson in each case is that those who supply a currency are happier when the price goes up. And those who demand the currency are happier when the price goes down, just like is true for every item.

Let's first talk about international tourists. Imagine a Chinese tourist traveling to another country, say the U.S. or France. When the Chinese tourist does this, the person needs to trade some yuan to get U.S. dollars or euros. So that tourist is supplying yuan and demanding dollars or euros. Now, that person loves a strong Chinese yuan because it buys more of those other currencies, so it feels like you have more to spend on your trip. Or to put it another way, a Chinese tourist traveling to another country wants those other currencies, like the U.S. dollar or the euro, to be weaker.

Now think about an international tourist, say, from the U.S. coming to visit China. That tourist will be trading U.S. dollars for Chinese yuan. It will want a stronger U.S. dollar that buys more Chinese yuan. Because that means, of course, that tourists can have a nicer vacation in China， that U.S. tourists in China want a stronger U.S. dollar and a weaker Chinese yuan. So let me sum it up this way: if the goal is for Chinese people to have a nicer vacation when they go overseas and they're buying goods and services overseas, the stronger Chinese yuan gives them more buying power. But if the goal is to have more foreign tourists visit china, or maybe if， you're a Chinese person who works in an industry or a place with a lot of foreign visitors and you want more and more tourists, then a weaker Chinese yuan will encourage more tourists. Again, the exchange rate is just like any price. Whether you want it higher or lower depends on what side of the market you're on.

Now, let's think through the winners and losers from exchange rate movements again. But this time, let's think about China's exporters and importers. Think first about a Chinese firm exporting to the U.S. The costs of the firm in China producing in China are measured in yuan. But when it sells in the U.S. it earns U.S. dollars, now this exporting firm will tend to like a weak Chinese yuan, because that means its costs are lower; and a strong U.S. dollar, because then it's earning something that's worth more. What will happen with that firm with that strong U.S. dollars, when it trades those U.S. dollars back into Chinese yuan to pay its workers and investors and pay for its supplies and so on? It will have a lot more yuan if the U.S. dollar is strong.

Now, let's think about the reverse case, a Chinese firm importing from the U.S. It could be importing some input production like machine tools, or it could be importing a product that will go directly to Chinese consumers. That importing firm is buying goods in, say, the U.S. market paying U.S. dollars. But when it sells them in china, it gets Chinese yuan. Now that firm will want a stronger yuan, because when it's selling in China, yuan it earns will be worth more than otherwise.

So a pattern emerges here. Chinese firms that are exporting abroad prefer a weak Chinese yuan and stronger foreign currencies, because they are earning the foreign currency. So they wanted strong. Chinese firms that are importing from abroad prefer a strong Chinese yuan and weaker foreign currencies, because they are earning Chinese yuan, and they want those to be as valuable as possible. The general pattern here is that a stronger Chinese yuan tends to hurt china's exports, but help china's imports. And on the other side, a weaker Chinese yuan tends to help china's exports, but hurt those who are importing to china.

We'll come back to these ideas as we go along. But for now, let's talk about international investors. Consider Chinese investors who make a financial investment in other economies, say the U.S. economy. They buy stock in U.S. companies or bonds, and U.S. companies or they buy U.S. real estate. Any gains they have from doing that are going to be measured in U.S. dollars. Those investors will like a strong U.S. dollar, because the U.S. dollars they earn with their investment are worth more.

On the other side, consider foreign investors like those from the U.S. looking for opportunities in China. They will earn their return on investment in Chinese yuan. So they would prefer a strong yuan and a weaker dollar. Again, a pattern emerges here： when the Chinese yuan gets stronger and foreign currency is weaker， that tends to hurt China's investors abroad because the foreign currencies they're earning are now worth relatively less if those currencies are weaker. Thus in this way, a stronger currency for China discourages an outflow of international capital, and encourages inflows from other investors as seeking higher returns in China. A weaker currency is the other way. Imagine the Chinese yuan gets weaker and foreign currencies get stronger. This tends to help China's investors who are trying to put money in other countries, because the foreign currencies they're earning are now worth relatively more. So a weaker currency for China encourages outflows of international financial capital and discourages inflows.

Now, I've been going through these patterns in some detail, and I know it's been a little quick. I hope it makes some sense, but there's a reason for doing this. If we're going to talk about the effects of exchange rates for China's economy or in the world economy, we need to know how changes in exchange rates affect these different groups. So we'll keep coming back to this over and over through the next few lectures.

Let's finish up here with our third question: Why might a country prefer a weaker currency? If you say it to most non-economists, is it better to have a strong currency or a weak currency? The answer seems obvious. It's better to be strong than weak, right? Strong must be better. Well, I hope you figured out that this intuition is not reliable. A strong currency just means buys more of other currencies. A weak currency just means buys less of other currencies. To make an argument that it's good for a currency to be stronger or weaker, you need to look at all the trade-offs that are involved and one common pattern will be talking about that often emerges.

These countries are tempted by having a weaker exchange rate. The reason is that as we discussed, a weaker exchange rate in your own country will tend to boost export industries. It will encourage exporters to sell abroad. Of course, weak exchange rate will also weaken all the importers’ cost more and will weaken industries that rely on imports. But many countries tend to ignore that. In the aftermath of the Great Recession back in 2008 and 2009, it was common to hear suggestions that countries should try for a weaker exchange rate to boost their exports and help their economic recovery.

Now, we'll talk about these issues more in the lectures to come, but now I just want to make one point. Remember, it is impossible for all countries to have weaker exchange rates. At the same time, when one currency is weaker, it means the other currencies must be stronger.

In the next lecture, we'll discuss what main factors cause exchange rates to become stronger or weaker in the market. And then we'll follow up with what policies central banks might use to affect exchange rates.

I'm Timothy Taylor. Thank you for listening to Himalaya.