2 FINANCE,

SAVING AND
INVESTMENT
After studying this chapter, you will be able to:
 Describe the flow of funds in financial markets
 Explain how financial decisions are made and the
risks that arise from these decisions
 Explain how lending and borrowing decisions
interact in financial markets
 Explain how governments influence financial
markets

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During 2008, financial markets around the globe went into
a meltdown.
The U.S. government took over the risky debts of Fannie
Mae and Freddie Mac ( 房利美＆房地美 ; 二房 ). The New York
Fed, the U.S. Treasury, and Bank of America tried to find
ways to save Lehman Brothers (no.3). The effort failed.
Bank of America bought Merrill Lynch and the U.S.
government bought insurance giant AIG (Bear Stearns
(no.5) bought by JPMorgan Chase).

Behind such drama, Wall Street plays a crucial unseen role

funneling [( 用漏斗 ) 注入 , not channel] funds from savers and
lenders to investors and borrowers.

How do financial markets work? What do they do?

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 次級房屋借貸危機

• 次級房屋借貸危機（ Subprime mortgage crisis ，簡稱次貸危機，金

融海嘯， 2008 年世界金融危機， 2008 年經濟崩潰）是由美國國內抵押貸款違
約和法拍屋急劇增加所引發的金融危機。它對全球各地銀行與金融市場產生了重大的不
良後果。次貸危機以 2007 年 4 月美國第二大次級房貸公司新世紀金融公司破產事
件為「標誌」，由房地產市場蔓延到信貸市場，許多金融機構和他們的客戶損失慘重，
進而演變為全球性金融危機。

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•次級貸款（簡稱次貸）是指借款人信用不好的貸款， 20 世紀初美國房地產市場持續走高，借款
人信用不好的人也能獲得貸款。金融機構將把錢借給那些能力不足以償清貸款的人，然後把這些住
房抵押貸款證券（ Mortgage-Backed Security ，簡稱 MBS ）做成金融衍
生品，打包分割出售給投資者和其他的金融機構
•評級機構不負責任地將這些債券評為 AAA 級，而買家也以為自己可以透過信用違約掉期等手段
規避風險。在債券層層包裝專賣的情況下，鏈條上的機構都低估了風險。當美國房價開始下跌的，
次級貸款大量違約，那些住房抵押貸款證券失去了其大部分的價值。造成許多金融機構資本大幅下
降，雷曼兄弟破產，美國國際集團 (AIG) 瀕臨倒閉，造成世界各地緊縮信貸。

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 Financial Markets and
Financial Institutions
To study the economics of financial institutions and
markets we distinguish between
 Finance and money
 Physical capital and financial capital
Finance and Money
The study of finance looks at how households and firms
obtain and use financial resources and how they cope with
the risks that arise in this activity.
The study of money ( 貨幣 ) looks at how households and
firms use it, how much of it they hold, how banks create
and manage it, and how its quantity influences the
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 Financial Markets and
Financial Institutions
Capital and Financial Capital
Capital (or physical capital) is the tools, instruments,
machines, buildings, and other items that have been
produced in the past and that are used today to produce
goods and services.
The funds that firms use to buy physical capital are called
financial capital ( 財務資本 ).

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 Financial Markets and
Financial Institutions
Capital and Investment
Gross investment is the total amount spent on purchases
of new capital and on replacing depreciated capital.
Depreciation is the decrease in the quantity of capital that
results from wear and tear and obsolescence.
Net investment is the change in the quantity of capital.
Net investment = Gross investment  Depreciation.

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 Financial Markets and
Financial Institutions
Figure 24.1 illustrates the
relationships among the
capital, gross investment,
depreciation, and net
investment.

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 Financial Markets and
Financial Institutions
Wealth and Saving
Wealth is the value of all the things that people own.
Saving is the amount of income that is not paid in taxes or
spent on consumption goods and services.
Saving increases wealth.
Wealth also increases when the market value of assets
rises—called capital gains ( 資本利得 Q; comments: should
be taxed)—and decreases when the market value of
assets falls—called capital losses.

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 Financial Markets and
Financial Institutions
Financial Capital Markets
Saving is the source of funds used to finance (verb)
investment.
These funds are supplied and demanded in three types of
financial markets:
 Loan markets (firms and households borrow $ from
banks to buy machines, cars, houses?)
 Bond markets ( 國庫劵、公司債、房貸抵押債券 ? （ Mortgage
Backed Securities ） )
 Stock markets ( 台積電、鴻海、台塑 4 寶 )
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 91 天期國庫券得標利率 1.11%
2023/02/23 23:52:27 經濟日報 記者陳美君／台北報導

中央銀行昨（ 23 ）日受財政部委託標售 91 天期國庫券，金額為 300 億元，得標利率落於

1.11% ，創下 2009 年 1 月以來、逾 14 年新高紀錄，並較 2022 年 6 月發行的同
天期國庫券利率，上漲 0.32 個百分點。 (3 月、 6 月、 9 月、 1 年 )
銀行資調主管指出，央行昨天標售 91 天期國庫券，得標利率明顯高於預期，主要是受到兩大利
空衝擊，一是接近月底，為市場資金需求較為旺盛之時，且接下來將進入 228 連假，銀行資金調
度態度轉趨保守，寧可多留一些現金在帳上；其次，近期美國公布的通膨與就業數據強勁，引發市
場對聯準會貨幣政策由鴿轉鷹的預期，並觸發我國央行 3 月是否跟進升息的憂慮。央行統計顯
示，昨天 91 天期國庫券絕大多數由銀行業抱回，比例高達 95.67% ，剩下 4.33% 則
是票券業拿下。

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 小額公債 12/7 標售 票面利率 1.75%
2022-11-24 17:23 經濟日報／ 記者 陳姿穎
財政部國庫署表示， 111 年公債定期適量發行計畫，將在 12 月 7 日委託中央銀行標售增額「 111 甲 10
期」公債新台幣 300 億元，年期為 10 年期，發行日期為 12 月 12 日，到期日至 2032 年 10 月 17
日。目前小額投資人每人可申購金額為新台幣 10 萬元至 150 萬元。
國庫署表示，為因應一般民眾購買公債需求，自 1993 年 4 月起以每期公債發行額 2% ，委託中華郵政公司代
售予小額投資人。民眾可依照各期公債發行公告指定期間，至全省 141 處郵局登記辦理申購公債，目前小額投資人
每人可申購金額為新臺幣 10 萬元以上、 150 萬元以下。
財政部表示，公債一向為我國債券市場流通性最佳的券種，票面利率固定每年付息一次，到期領回本金，投資報酬率穩
定；依本期「 111 甲 10 期」 10 年期公債前於 10 月標售發行時，票面利率為 1.75% ，相較中華郵政公
司三年期定期儲金固定利率 1.10% 為優；且債券到期前可依個人理財規劃隨時賣回中華郵政公司，也可作為公務
保證用途等，為保本穩健型金融商品。

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 Financial Markets and
Financial Institutions
Financial Institutions
A financial institution is a firm that operates on both
sides of the markets for financial capital.
It is a borrower in one market and a lender in another.
Key financial institutions are
1. Commercial banks (deposits, payments, loans; E.SUN,
Mega Bank)
2. Government-sponsored mortgage lenders ( 房地、房利 ; 6 trillion
of $ 12 trillion of mortgages)
3. Mutual funds ( 共同基金 e.g. 群益馬拉松基金，定期定額 )
4. Pension funds ( 退休基金 , ex: 公務人員退撫基金、郵儲基金、勞保基金、勞退基金合
稱「四大基金」 )
5. Insurance companies (Cathay; Shinkong)
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 共同基金 (Mutual Fund)

• 共同基金 (Mutual Fund) 是集合投資人的資金，委託專業的投資機構代為管理操作的

投資工具，投資人彼此共同承擔風險、共同分享投資利潤。
• 按交易方式可分為開放式基金、封閉式基金及股票交易所交易基金 (ETF)

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 Financial Markets and
Financial Institutions
Funds that Finance Investment
Funds come from three sources:
1. Household saving S ( 企業呢 ?)
2. Government budget surplus (T – G)
3. Borrowing from the rest of the world (M – X)
Figure 24.2 on the next slide illustrates the flows of funds
that finance investment.

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 股價超跌 併購戲碼啟動
2015/08/31 08:15 時報資訊
【時報 - 台北電】…鴻海現金部位高達 6,145 億元、短期投資 24.8 億元，可供調度的資
金部位直逼 6,200 億元，無論是主動、被動參與併購大戲，都最具實力。
據各公司資產負債表，鴻海現金部位高達 6,145 億元，短期投資也有 24.8 億元，若將每個
月的折舊現金淨流入、營運現金流入合計，鴻海可動用的資金規模遠超過帳上現金。 ( 在
2013 年負債比率甚至從原本的 42.48% 提高至 61.84% ，金額高達 1.238 兆
元，已可稱是台灣民營企業負債總額最高的公司。 )
另外，台積電的現金部位也不惶多讓，帳上現金達 5,288 億元，短期投資達 214.56 億
元。因帳上現金豐沛，台積電即使連續收掉兩大綠能事業，仍有餘裕規畫大陸 12 吋廠。

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Financial Markets and
Financial Institutions

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 Financial Decisions and Risk

Financial markets and institutions enable us to make

decisions about the timing of our use of scarce resources,
and to manage the risks that arise from these decisions.
The Time Value of Money
To compare current and future dollars, we convert future
dollars, called “future value,” to current dollars, called
“present value.”
Present value of Future amount, n years in the future when
the interest rate is r percent equals
Future amount ÷ (1 + r)n

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 Financial Decisions and Risk

Net Present Value

Net present value 淨現值 is the present value of all the
future flows of money that arise from a financial decision
minus the initial cost of the decision.
An example:
Jack can make a game bot for $500 and sell it after two
years for $2,420. The interest rate is 10 percent a year.
The present value of $2,420 two years in the future is
$2,420 ÷ (1 + 0.1)2, which is $2,000.
The net present value of Jack’s bot equals $2,000 – $500,
or $1,500.
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 Financial Decisions and Risk

Decision Rule
The financial decision rule is:
If the net present value is positive, do it!
If the net present value is negative, don’t do it!
Following this decision rule maximizes wealth when the
future money flows are not risky.
Where the future is uncertain, the rule is modified to:
Do it if the net present value is large enough to make a
loss sufficiently unlikely.

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 Financial Decisions and Risk

Financial Risk: Insolvency and Illiquidity

A financial institution’s net worth 淨值 is the total market
value of what it has lent minus the market value of what it
has borrowed.
If net worth is positive, the institution is solvent ( 有償付能力的 )
and can remain in business.
But if net worth is negative, the institution is insolvent ( 破
產 ) and must go out of business.

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 Financial Decisions and Risk

Market Risk: Interest Rates and Asset Prices

The interest rate on a financial asset equals the interest
received expressed as a percentage of the price of the
asset.
For example, if the price of the asset is $50 and the
interest is $5, then the interest rate is 10 percent (=5/50).
If the asset price rises (say to $200), other things
remaining the same, the interest rate falls (2.5
percent=5/200). Ex: 台北市房價上漲 , 利率下降 ?
If the asset price falls (say to $20), other things remaining
the same, the interest rate rises (to 25 percent).
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 Financial Decisions and Risk

Getting Real
An economy with inflation has two interest rates: the
nominal interest rate and the real interest rate.
The nominal interest rate is the number of dollars that a
borrower pays and a lender receives in interest in a year
expressed as a percentage of the dollars borrowed and
lent.
For example:
If the annual interest paid on a $500 loan is $25, the
nominal interest rate is 5 percent (25/500=5%) per year.

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 Financial Decisions and Risk
The real interest rate is the nominal interest rate
adjusted to remove the effects of inflation on the buying
power of money.
The real interest rate is approximately equal to the nominal
interest rate minus the inflation rate. (r = i – inflation rate)
For example:
If the nominal interest rate is 5 percent a year and the
inflation rate is 2 percent a year, then the real interest rate is
3 percent a year.
The real interest rate is the opportunity "cost" of borrowing.

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 The Loanable Funds Market

The market for loanable funds ( 可貸資金市場 ) is the

aggregate of all the individual financial markets.
The market for loanable funds determines the real interest
rate, the quantity of funds loaned, saving, and investment.
We’ll start by ignoring the government and the rest of the
world.
The Demand for Loanable Funds
The quantity of loanable funds demanded depends on
1. The real interest rate
2. Expected profit
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 The Loanable Funds Market

Demand for Loanable Funds Curve

The demand for loanable funds is the relationship
(between the quantity of loanable funds demanded and the
real interest rate) when all other influences on borrowing
plans remain the same.
Business investment is the main item that makes up the
demand for loanable funds. ( 高鐵、台塑 4 寶、 tsmc etc.)
高鐵總投資金額超過新台幣 5,000 億元，列車車廂 $?

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 高鐵聯貸 3,900 億 借新還舊
2009/07/06 經濟日報
•高鐵聯貸 3,900 億 借新還舊
為改善高鐵公司財務結構，交通部、高鐵及台灣銀行達成初步共識，重新整合高鐵所有債務後，與
銀行團簽訂新的聯貸契約，金額合計近 3,900 億元，並給寬限期（付息不還本的期間），為使
聯貸行籌組順利，參貸銀行家數大幅減為十家。
•1994 年 7 月，六輕正式動工，以填海造地方式在麥寮西海岸鋪出新生地，並成立台塑石化管
理工業區及麥寮工業區專用港管理公司管理麥寮港。第一期工程於 1998 年完工，並開始營運。
如今，台塑在六輕投資總金額達新台幣 6,528 億元

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 The Loanable Funds Market

Figure 24.3 shows the

demand for loanable funds
curve.
A rise in the real interest
rate decreases the quantity
of loanable funds
demanded.
A fall in the real interest
rate increases the quantity
of loanable funds
demanded.

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 The Loanable Funds Market

Changes in the Demand for Loanable Funds

When the expected profit changes, the demand for
loanable funds changes.
Other things remaining the same, the greater the expected
profit from new capital, the greater is the amount of
investment and the greater the demand for loanable
funds.

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 The Loanable Funds Market

The Supply of Loanable Funds

The quantity of loanable funds supplied depends on
1. The real interest rate (saving account or term deposit?)
2. Disposable income ( 可支配所得 )
3. Expected future income
4. Wealth
5. Default risk ( 違約風險 : 指銀行倒閉，領不到錢 )

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 The Loanable Funds Market
The Supply of Loanable Funds Curve
The supply of loanable funds is the relationship between
the quantity of loanable funds supplied and the real
interest rate when all other influences on lending plans
remain the same.
Saving is the main item that makes up the supply of
loanable funds. (not just household, but including firms)
蘋果持有 2376 億美元的現金和有價證券 (2022,Q4)
【賴宇萍】據穆迪（ Moody's ）估算，截至今年 6 月底，
2015 年 3 月 14 日 21:06
全美企業共握有 2 兆美元（ 63 兆元台幣）現金，而蘋果的現金就高達 1780 億美元
（ 5.61 兆元台幣），約佔全美企業現金量的 9%

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 The Loanable Funds Market

Figure 24.4 shows the

supply of loanable funds
curve.
A rise in the real interest rate
increases the quantity of
loanable funds supplied.
A fall in the real interest rate
decreases the quantity of
loanable funds supplied.

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 The Loanable Funds Market

Changes in the Supply of Loanable Funds

A change in disposable income, expected future income,
wealth, or default risk changes the supply of loanable
funds.
An increase in disposable income, a decrease in
expected future income, a decrease in wealth, or a fall in
default risk increases saving and increases the supply of
loanable funds.

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 The Loanable Funds Market

Equilibrium in the Loanable Funds Market

The loanable funds market is in equilibrium at the real
interest rate at which the quantity of loanable funds
demanded equals the quantity of loanable funds supplied.

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 The Loanable Funds Market

Figure 24.5 illustrates the

loanable funds market.
At 4 percent a year, there is
a surplus of funds and the
real interest rate falls.
At 2 percent a year, there is
a shortage of funds and the
real interest rate rises.
Equilibrium occurs at a real
interest rate of 3 percent a
year.

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 The Loanable Funds Market

Changes in Demand and Supply

Financial markets are highly volatile in the short run but
remarkably stable in the long run (ex: bond market).
Volatility ( 易變 ; 反覆無常 ) comes from fluctuations in either the
demand for loanable funds or the supply of loanable funds.
These fluctuations bring fluctuations in the real interest
rate and in the equilibrium quantity of funds lent and
borrowed.
They also bring fluctuations in asset prices.

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Copyright © 2023 Pearson Education, Ltd.
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 The Loanable Funds Market

Figure 24.6(a) illustrates an

increase in the demand for
loanable funds. Q:
An increase in expected
profits increases the
demand for funds today.
The real interest rate rises.
Saving and quantity of
funds supplied increases.

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 The Loanable Funds Market

Figure 24.6(b) illustrates an

increase in the supply of
loanable funds.
If one of the influences on
saving plans changes and
saving increases (ex: stock
market crash), the supply
of funds increases.
The real interest rate falls.
Investment increases.

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 Government in the Loanable Funds
Market
Government enters the loanable funds market when it has
a budget surplus or deficit.
A government budget surplus increases the supply of
funds.
 A government budget deficit increases the demand for
funds.
In reality? except Bill Clinton

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Copyright © 2023 Pearson Education, Ltd.
Copyright © 2023 Pearson Education, Ltd.
Copyright © 2023 Pearson Education, Ltd.
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 Government in the Loanable Funds
Market
Figure 24.7 illustrates the
effect of a government
budget surplus.
A government budget
surplus increases the supply
of funds.
The real interest rate falls.
Investment increases.
Saving decreases

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 Government in the Loanable Funds
Market
Figure 24.8 illustrates the
effect of a government
budget deficit.
A government budget deficit
increases the demand for
funds.
The real interest rate
rises.
Saving increases.
Investment decreases ( 排擠
效果 !!!).
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 Crowding out 排擠效果

•一個國家的總投資仰賴 ( 政府部門與私部門 ) 的投資。當政府舉債投資的時候，會

造成利率升高，以致私部門的企業不願意借錢投資，反而造成私部門的投資減少，我
們稱之為 crowding out effects ( 排擠效果 )

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 Government in the Loanable Funds
Market
Figure 24.9 illustrates the
Ricardo-Barro effect.
A budget deficit increases
the demand for funds.
Rational taxpayers increase
saving, which increases the
supply of funds.
Crowding-out is avoided.
Increased saving finances
the deficit.

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 Ricardo-Barro 效果

•但是， Ricardo & Barro 認為政府的預算赤字對實質利率沒有影響

•Barro 認為：理性的納稅人瞭解今日的預算赤字將是未來較高的課稅與較低的可支配所得。預期未來的
可支配所得降低，導致儲蓄增加，私人儲蓄供給的增加抵銷了政府的負儲蓄
•大部分的經濟學家認為 Ricardo-Barro 效果是極端的情況，但私人儲蓄供給可能產生部分的
Ricardo-Barro 效果
•(repeat) Ricardo-Barro Effects : 一個國家如果現在赤字增加，未來則會加稅來彌補該赤
字。所以一個理性的公民，為了能夠在未來保持既有的生活水準，會在目前減少消費，增加存款，或者是去
買政府舉債所發行的債券。如果民間增加的存款所購買的政府債券剛好等於政府的舉債，稱之為
Ricardo-Barro Equivalence ，這時就不會有排擠效應 ( 看下頁的圖，利率不變 !)

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