Developments In International Finance Research Articles

The central banking contribution to international statistics: A Basel perspective

A key goal of the Bank for International Settlements is to produce in-depth economic analysis drawing on its position at the intersection of research and policy, its financial markets savvy, and its unique statistical chest. Since the interwar financial crisis in the 1930s, the traditional objective of assessing international linkages has continuously guided BIS statistical offering. Important micro-level data sets have been collected to support global financial regulation in parallel. In addition, the BIS hosts the Irving Fisher Committee on Central Bank Statistics, a global network of central bank statisticians, economists and policymakers who discuss statistical issues of interest to central banks and develop related methodological work. It also actively supports various global statistical initiatives, especially to close economic and financial data gaps. These activities have proved instrumental for tracking and understanding developments in international finance, as was evident again on the occasion of the recent COVID-19 pandemic. Looking ahead, the BIS and the IFC can continue to contribute actively to the international statistical cooperation framework.

The predictive content of oil price and volatility: New evidence on exchange rate forecasting

We propose oil price volatility as a new fundamental for exchange rate forecasting. This fundamental parallels recent theoretical developments in international finance to resolve the disconnect between macro variables and exchange rates. By focusing on small open economies that export oil, we then provide a comprehensive empirical evaluation of the forecasting performance of the fundamental in multiple countries. We find that oil price and volatility contain out-of-sample predictive content for the exchange rate at daily frequency, especially when crude oil represents a significant fraction of the country’s exports and when there are strong trade ties between the currency areas. We also discover that directional change, i.e. appreciation or depreciation, can be forecasted even in the absence of point forecastability. Our findings are robust to forecast evaluation method, volatility measure and evaluation period, thus supporting the role of financial channels in exchange rate determination. Moreover, the predictive content dissipates when we move from daily to monthly frequency, suggesting that temporal data aggregation may explain the failure to find predictability in past work using monthly or quarterly data.

INTERNATIONAL FINANCE IN THE CONDITIONS OF GLOBALIZATION

Background. The international finance in the conditions of globalization is providing the strengthening for international cooperation and activity of supranational institutions, up growth volumes of foreign trade, and development of digital technology. It is important to identify the factors that influence and determine the development of international finance. The aim of the paper is to develop the theoretical and methodological approaches to defining the determinants of globalization's impact on the development of international finance. Materials and methods. It was used a system of scientific methods and approaches, which allowed to achieve the study goal, in particular: system method –for disclosing approaches to the evolution of international financial relations and substantiation of the determinants of their development; methods of scientific abstraction, structural, analysis and generalization are used for the study of the dynamics and features of the functioning of individual segments of international finance. Results. The development of international finance reflects the growth of financial potential countries and the global GDP. The new general principles in society development are forming in the condition of globalization. The international finance makes for “blurring the borders”, acceleration of calculations and the movement of capital. It has deepened the system of interrelations of the architectonics of international finance and it is forming a new matrix of their relations. The financial and banking technologies of settlements play an important role in the conditions of globalization. The emergence and functioning of global financial centers accelerated the movement of international financial flows. There is an accumulation of significant financial resources at the disposal of TNCs, TNPs, TNBs in the world. The dollarization of the nation's economy and rapid development of Internet digital technologies affect the volumes of foreign economic activity, and individual sovereign and global risks. International financial institutions play an important role in stabilizing global development, financing the strategic goals of the world community, counteracting and overcoming financial-banking crises, etc. Conclusion. The deepening of integration processes in international finance strengthens the influence of general and specific factors. The adaptability of the international finance system provides a new global matrix of financial relations and its institutional architecture. Transparency, stability, and development of national financing and banking systems and international financial-credit institutions play a significant role in ensuring sustainable development in the world. The development of the institutional environment should ensure the effectiveness of international cooperation and the use of financial resources, the protection of national sovereignty, and national security.

The formation and development of international finance: the genesis of stages

The article deals with the evolution of international finance. The methodology of identifying individual periods of international finance and their subsequent transformation into a system of common views is analyzed. Principles of construction of the logic circuit and justification of evolutionary development stages are discovered. Binary stages of the global financial system evolution are overviewed.

The Elephant In The Ground: Managing Oil And Sovereign Wealth

One of the most important developments in international finance and resource economics in the past twenty years is the rapid and widespread emergence of the $6 trillion sovereign wealth fund industry. Oil exporters typically ignore below-ground assets when allocating these funds, and ignore above-ground assets when extracting oil. We present a unified stylized framework for considering both. Subsoil oil should alter a fund’s portfolio through additional leverage and hedging. First-best spending should be a share of total wealth, and any unhedgeable volatility must be managed by precautionary savings. If oil prices are pro-cyclical, oil should be extracted faster than the Hotelling rule to generate a risk premium on oil wealth. Finally, we discuss how our analysis could improve the management of Norway’s fund in practice.

International Finance and Economy of Bulgaria (In Bulgarian)

The book is an attempt to make a presentation of the development of international finance and economy in Bulgaria from mainly a historical perspective, until the recession after 2008. The detailed view of facts allows to make new interpretation of the processes and leads to some surprising conclusions. Given the fact that in modern Bulgarian economic history three transitions - to capitalist, than to planned and again to market economy, the emphasis of the text is on transitional aspects of Bulgarian economy.

RECENT ADVANCES IN INTERNATIONAL FINANCE: INTRODUCTION

Abstract.Arguably, international finance is one of the most exciting areas in economics. The development of international finance is influenced and shaped, at least in part, by the continuing process of globalization and integration. In the last 25 years the profession has witnessed the proliferation of both theoretical models and empirical analyses in international finance. The analysis of both new and existing issues has benefited from increasingly elaborate modelling techniques and sophisticated empirical tools.

Reporting the Arab-Israeli conflict: how hegemony works

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.

Recent developments in international finance: A guide to research

Abstract This is a critical evaluation of the state of the art in International Finance. Several points of reference are selected: The Mundell–Fleming–Branson (MFP) paradigm, the monetary model with purchasing power parity (PPP) as a long run anchor, the representative agent approach and the natural real exchange rate (NATREX) model. Their strengths and weaknesses are identified from both a theoretical and empirical point of view. We conclude with a suggestion of what is a fruitful explanation of medium to longer run movements in the real exchange rate and the current account.

The introduction of commercial paper — a case study in the liberalisation of the Japanese financial markets

Summary The CP market was introduced in Japan because there was felt to be a need to offer corporate entities a means of raising funds in the open market other than through gensaki. Secondly, the financial authorities regarded it to be an appropriate step in reaction to the recent developments in international finance. A CP is a promissory note that is subject to the Law on Bills. Both banks and securities companies are allowed to engage as dealers on the primary market as a ‘secondary’ and ‘supplementary’ business, respectively. They are joined by money market brokers on the secondary market. From the very first day, the market took a different shape from its counterpart in the USA. Issuing rates were not posted at about the level of CED rates, as they normally are in the USA, but were at ’harakiri rates’. The fight for market share among the primary dealers was so severe that they also absorbed tax payments and did not charge commissions with the first issue. Because trading paper as gensaki was the only way the first issue could be passed on to investors, the result of the ’harakiri issue’ was the development of a very active secondary market. Whether or not CP will develop into a major segment of the open market remains to be seen in the future. Even if it turns out to be ‘just another game’ of Japan's financial players, the appearance of the CP market has highlighted two major underlying trends in the liberalisation process. Firstly, the necessity for rating agencies is strongly emphasised. Secondly, the ‘business wall’ between banks and securities firms was breached once again, making it even more fragile in the face of future attacks.

The evolution of foreign banking institutions in the United States: developments in international finance

Foreword by Terri Sohrab Preface Evolution of Foreign Banking Institutional Structure of International Banking: Foreign Banking Offices in the United States Legal Environment International Financial Markets U.S. International Lending Institutions Motivation and Area of Specialization Market Structure and Activities of Foreign Banks Major Foreign Banking Concerns in the United States International Trade and Banking Developments Impact of Foreign Banks and Future Prospects Selected Bibliography Index

Developments in International Finance

Developments in International Finance

Clearing up common misconceptions of currency portfolios

Recent interest has centered on the use of an asset dominated in a basket of currencies instead of a single currency. The reason for this is derived from the reduction in the variance by diversifying assets into more than one currency. As tong as the currencies included in the basket are not perfectly correlated, the risk of holding that basket (as measured by variance) is reduced. The risk can be lessened to a larger extent if the correlation coefficients between the currencies included in the portfolio are small or negative. This diversification concept was applied when the Standard Drawing Rights (SDR's) were developed to be a substitute for the dollar as the reserve asset of central banks. In effect, the SDR's allow foreign countries to hold a reserve asset which has less volatility than the dollar as a medium for managed floating. This concept has also been examined for use in the international capital markets to reduce exchange rate risk. For the same reason, OPEC leaders have studied the possibility of substituting a basket of currencies for the dollar as apricing mechanism for oil.They have planned to implement this idea by the end of 1980. With the development of international finance, the forward market has been a means to hedge against exchange rate risk. Critics of currency-portfollo theory may suggest that the forward market will allow international money managers to cover themselves at no additional cost when holding an asset representing a single currency. However, there are extra costs to hedging. First, a transaction fee is associated with forward purchases of currency. Also, the act of hedging against long term exchange rate risk requires a long term forward market which is not available. There is some question as to how effective the forward market would be in reducing risk when holding ten or 20 year bonds denominated in one currency. With regard to OPEC's pricing of oil the same argument follows. Critics suggest that those OPEC countries accepting dollars for oil could stabilize their import purchasing power through buying other currencies forward with dollars. As the dollars are received, they would be delivered in return for other currencies at a given exchange rate agreed upon in the past. Although this insulates OPEC countries for short term periods from dollar depreciation against foreign currencies, it provides no long term security. Second, OPEC desires to avoid variable transaction fees associated with the persistent forward trading of dollars for other currencies. To summarize, some uses of currency portfolios have been mentioned. Certain misconceptions have developed resulting in the misunderstanding that hedging can be substituted instead of a basket of currencies for the given situations. Hedging techniques, though valuable, require transaction costs and maturity constraints and are therefore not perfect substitutes for currency portfolio implementation.