International Finance: Contemporary Issues

International Finance: Contemporary Issues

International Finance: Contemporary Issues

International Finance: Contemporary Issues

Synopsis

In this updated fourth edition, author Maurice Levi successfully integrates both the micro and macro aspects of international finance. He sucessfully explores managerial issues and focuses on problems arising from financial trading relations between nations, whilst covering key topics such as:* organization of foreign exchange markets* determination of exchange rates* the fundamental principles of international finance* foreign exchange risk and exposure* fixed and flexible exchange rates.This impressive new edition builds and improves upon the popular style and structure of the original. With new data, improved pedagogy, and coverage of all of the main developments in international finance over the last few years, this book will prove essential reading for students of economics and business.

Excerpt

In the last quarter century the volume of international financial flows has expanded enormously and dwarfed international trade. While at the end of 1991 world trade touched the $3.5 trillion mark, the cross-border financial flows were fifty times as much. The World Financial Markets data show that they rose close to $200 trillion. Conventional wisdom had treated international trade as the motive force behind international financial flows. Apparently this relationship did not hold and the international financial markets had picked up their own momentum. At present the large volume of international financial flows is generated by the large size of the international financial market system. To name one indicator, by the end of the 1980s the total volume of the Eurocurrency market was in the vicinity of $5 trillion.

The major financial markets are more closely integrated today than they ever were in the past. One of the rationales behind greater integration is the development of a whole new range of financial instruments. The decade of the 1980s has seen the evolution of greater numbers of such instruments than any such period in the past. The principal ones, à la Aliber, are bank deposits denominated in all the SDR currencies plus the Swiss franc, Eurobonds in several currencies, interest rate swaps, futures contracts in foreign exchange, foreign exchange swaps, zero-coupon bonds and bonds with interest payable in one currency that are convertible into another currency. Deregulation and liberalization of different financial markets gave an immense impetus to financial integration. Although the pace, scope and direction of deregulation of individual markets varied, progress made on this count was indeed substantial and so was its impact. For instance, the deregulation of Japanese financial markets helped to make Japan the largest creditor country in the world in the mid-1980s. Market liberalization affected interest rate ceilings, reserve requirements and barriers to geographical expansion, which in turn stimulated free international movement of capital. Another development that led to closer integration was 'cross-penetration' of foreign ownership which is visible in the sharp increase in the number of foreign banks and security firms in all the major financial centres of the world.

The raison d'être of this volume is to fill a gap in the teaching of international finance. There are some good introductory textbooks and Eitman and Stonehill's book is very popular with instructors and students, although its current edition is long overdue for a thorough revision. However, when a student tries to go beyond this set of books, he is likely to be a trifle flustered because he is generally referred to journal articles or books which are either too technical or over-specialized or both. There is hardly any book to cover the intermediate ground at a medium technical level. Besides, some issues are incompletely covered by standard textbook treatments. The highly motivated students indeed make forays in the literature and sporadically locate what they need but this endeavour tends to be time consuming and frustrating. Covering the middle ground and covering issues not generally covered in standard textbooks, therefore, became the logic of selection

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