This is the book Policy and Theory of International Finance (v. ). This book is licensed under a Creative Commons by-nc-sa Read this book. PDF . International Finance Theory and Policy is built on Steve Suranovic's belief that to understand the international economy, students need. PDF Drive is your search engine for PDF files. As of today we have 78,, eBooks for you to download for free. No annoying ads, no download limits, enjoy .
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ests form the foundation for this book in international finance, a subject that he believes to Finance; Journal of International Economics; Management Science; . Dec 31, This book had a forerunner—“International Financial Markets and The Firm”, . in International Finance, Exchange Rate Volatility, Trade, and. International Financial Management Seventh Edition The McGraw-Hill/Irwin and Marcus Tenth Edition Financial Markets and Finance: M Book Essentials of.
As shown by a series of recent corporate scandals at companies like Enron, WorldCom, and Global Crossing, managers may pursue their own private interests at the expense of shareholders when they are not closely monitored.
Extensive corporate malfeasance and accounting manipulations at 4 The source for this information is The New York Times, February 4, , p. Lamentably, some senior managers enriched themselves enormously in the process. Clearly, the boards of directors, the ultimate guardians of the interests of shareholders, failed to perform their duties at these companies.
Needless to say, the corporate governance problem is not confined to the United States. In fact, it can be a much more serious problem in many other parts of the world, especially emerging and transition economies, such as Indonesia, Korea, China, and Russia, where legal protection of shareholders is weak or virtually nonexistent.
Shareholders are the owners of the business; it is their capital that is at risk.
It is only equitable that they receive a fair return on their investment. Private capital may not have been forthcoming for the business firm if it had intended to accomplish any other objective. It is thus vitally important to strengthen corporate governance so that shareholders receive fair returns on their investments.
In what follows, we are going to discuss in detail: 1 the globalization of the world economy, 2 the growing role of MNCs in the world economy, and 3 the organization of the text. In this section, we review a few key trends of the world economy: i the emergence of globalized financial markets, ii advent of the euro iii continued trade liberalization and economic integration, and iv large-scale privatization of state-owned enterprises.
Emergence of Globalized Financial Markets The s and 90s saw a rapid integration of international capital and financial markets. The impetus for globalized financial markets initially came from the governments of major countries that had begun to deregulate their foreign exchange and capital markets.
For example, in Japan deregulated its foreign exchange market, and in the Tokyo Stock Exchange admitted as members a limited number of foreign brokerage firms. Additionally, the regulation separating the order-taking function from the marketmaking function was eliminated. In Europe, financial institutions are allowed to perform both investment-banking and commercial-banking functions. Hence, the London affiliates of foreign commercial banks were eligible for membership on the LSE.
These changes were designed to give London the most open and competitive capital markets in the world. The United States recently repealed the Glass-Steagall Act, which restricted commercial banks from investment banking activities such as underwriting corporate securities , further promoting competition among financial institutions.
Even developing countries such as Chile, Mexico, and Korea began to liberalize by allowing foreigners to directly invest in their financial markets. Advent of the Euro I. Examples of these innovative instruments include currency futures and options, multicurrency bonds, international mutual funds, country funds, and foreign stock index futures and options.
Corporations also played an active role in integrating the world financial markets by listing their shares across borders. Such wellknown non-U. At the same time, U.
Such crossborder listings of stocks allow investors to download and sell foreign shares as if they were domestic shares, facilitating international investments. These technological advancements, especially Internet-based information technologies, gave investors around the world immediate access to the most recent news and information affecting their investments, sharply reducing information costs.
Also, computerized order-processing and settlement procedures have reduced the costs of international transactions. Based on the U. Department of Commerce computer price deflator, the relative cost index of computing power declined from a level of in to As a result of these technological developments and the liberalization of financial markets, cross-border financial transactions have exploded in recent years.
The advent of the euro at the start of represents a momentous event in the history of world financial system that has profound ramifications for the world economy.
No single currency has circulated so widely in Europe since the days of the Roman Empire. Considering that up to 10 countries, including the Czech Republic, Hungary, and Poland, may join the European Union EU by the year , and that many of them would like to adopt the euro relatively soon thereafter, the transaction domain of the euro may become larger than that of the U.
Once a country adopts the common currency, it obviously cannot have its own monetary policy. The common monetary policy for the euro zone is now formulated by the European Central Bank ECB that is located in Frankfurt and partly modeled after the Bundesbank, the German central bank. ECB is legally mandated to achieve price stability for the euro zone. Considering the sheer size of the euro zone in terms of population, economic output, and world trade share and the prospect of monetary stability in Europe, the euro has a strong potential for becoming another global currency rivaling the U.
For instance, by redenominating corporate and government bonds and stocks from 12 different currencies into the common currency, the euro has precipitated the emergence of continentwide capital markets in Europe that are comparable to U. Companies all over the world can benefit from this development as they can raise capital more easily on favorable terms in Europe. Since the end of World War I, the U. Similarly, international trade in primary commodities, such as petroleum, coffee, wheat, and gold, is conducted using the U.
Reflecting the dominant position of the dollar in the world economy, central banks of the world hold a major portion of their external reserves in dollars. The ascendance of the dollar reflects several key factors such as the dominant size of the U. However, once economic agents start to use the euro in earnest as an invoice, vehicle, and reserve currency, the dollar may have to share the aforementioned privileges with the euro. As Exhibit 1. This implies that, over the same time period, international trade increased nearly three times as fast as world GDP.
For some countries, international trade grew much faster; for Germany, the ratio rose from 6. This reflects the inward-looking, protectionist economic policies these countries pursued in the past.
Even these once-protectionist countries are now increasingly pursuing free-market and open-economy policies because of the gains from international trade. The principal argument for international trade is based on the theory of comparative advantage, which was advanced by David Ricardo in his seminal book, Principles of Political Economy According to Ricardo, it is mutually beneficial for countries if they specialize in the production of those goods they can produce most efficiently and trade those goods among them.
The author did provide a good, comprehensive example. The textbook used examples and recent data to demonstrate theoretical models, which makes it easy to digest but requires more updates.
The data sources are listed in the textbook so update is not difficult but it may affect the arguments. The text is very readable.
The examples make difficult concepts and models understandable in an enjoyable way. The text also clarified misconceptions seen in media and held by students. Good job!
This book is more readable for undergraduate students than the one I have been using in my International Finance class in the past 10 years. It is not heavily model intensive and it is not purely narrative either. It covers major topics in International Finance in an logical order. It uses recent data to demonstrate concepts and relations.
My reservations are: I wish it came with a test bank. The text is fairly comprehensive. It covers all the major areas of international finance and uses standard economic concepts and models. I think students would enjoy the chapter discussing the welfare effects of trade imbalances, which is well I think students would enjoy the chapter discussing the welfare effects of trade imbalances, which is well done with clear examples. Those who are interested in details of the foreign exchange market itself will have to look elsewhere.
While interest rate parity is given a chapter, the concept of covered interest parity is only mentioned in an exercise. I was surprised that the impossible trinity or trilemma was not mentioned even though the text devoted significant attention to the limits that a fixed exchange rate regime places on monetary autonomy. The text itself does not have a table of contents, but one is available in the bookmarks of the pdf file.
The text does not have a glossary, but the pdf file is easy to search. I did not see any additional instructor resources, such as an instructor's manual, a test bank, or lecture slides.
The content is generally accurate aside from minor typos and provides a balanced, unbiased approach to the major issues.
The text is focused primarily on the major economic concepts, which gives it longevity.
The data used in the text only go up to around In most cases, however, there are working links to the data sources in the pdf file that would allow a reader to obtain updated data without too much hassle.
It would be nice to have more coverage of recent issues to give the text greater relevance to students. The text is internally consistent. The macroeconomic approach developed and applied is the AA-DD model. The text gradually builds up to that model and applies it consistently. The chapters are all divided into short sections, which makes it easy to choose among topics within a chapter.
Many of the chapters are building up to the AA-DD model, which is then applied for a number of chapters, so it would not be a good idea to skip any of the major building blocks altogether. My major issue with the book is the interface. The text, tables, and figures in the pdf file are not typeset in a very professional manner. I found this to be a significant distraction and I think it would really turn students off.
The graphical analyses and equations in a text like this are especially important, but they are not clearly presented here. The equations are either not properly typeset or are blurry. This could be a major roadblock for students, many of whom are uncomfortable with equations. The diagrams leave a lot to be desired and I think students would have trouble following the 3-D diagrams of the AA-DD model.