International Business

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  1. IMF International Monetary Fund
    •   -try to bailout countries imbalances or equity issues    
    •  -helping countries in trouble   
    •  -crisis management criticized 
  2. Spot Exchange
    happens on the day, it is the current exchange rate, changes daily
  3. Forward Exchange:
    sign today but don't make exchange till later, unbiased predictor of future spot exchange rate
  4. calculation of premium
     F(forward)x -spot exchange rate / spot exchange rate X 12/# of months X 100 (to get percent)
  5. Factors Influencing Currency Value: ECONOMIC
    •    balance of payments   
    •  interest rates   
    •  inflation   
    •  monetary and fiscal policies 
    •    international competitiveness   
    •  monetary reserves   
    •  gov't control and incentives 
    •    importance of currency to the world
  6. Price Difference and Absolute PPP
    •  -law of one price   
    •  -competitive markets free of transportations costs and trade barriers, identical products sold in different countries      
    •     -must sell for the same price when their price is expressed in terms of same currency   
    •  example: US/Japan = 1$ to 120 yen, so a jacket in new york that sells for 50 should be sold for 6000, 50 X 120
  7. Purchasing power party
    -by comparing the prices of identical products in difference currencies, it should be possible to determine the 'real' or PPP exchange rate if markets are efficient 
  8. Role of the World Bank
  9.  -International Bank for Reconstruction and Development     -created to rebuild Europe war-torn economies   
    •  -overshadowed by the Marshall Plan  
    •  -turns to development     
    •  -lending money  to developing nations for a long-term                -examples: education, population control
  10. Role of IMF
    • - surveillance of exchange rate policies 
    • -short term financial assistance (including credits and loans)    - technical assistance (expertise in fiscal/monetary policy)
  11. Crisis Management of IMF
    •      -IMF role expanded to meet the various crisis       
    •   -plans of deflationary measures/austerity  
    •  1. currenceny
    •   -thailand     
    • 2. banking       
    •   -non-performing loans, can't get people to pay them back          -giving out bad loans and not being able to get them back      3. foreign debt             
    •   -borrowed too much money, can't pay it back
  12. Four Basic Strategies
    • global/standardization
    • localization/multi domestic strategy
    • transnational
    • international strategy
  13. REI Regional Free Trade Block
      -WTO believes this (REI) is the first step to overall globalization of economy/agreement     -easier to reach agreements between agreement between two parties, bilateral agreement -> just two parties      -agreement amount countries in a geographic location to reduce and ultimately remove tariffs and NTBs to free flow of goods services and factors of production amount each other
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International Business
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