Quiz 1 - INBU 4200 Lecture 1: Introduction to Globalization...

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INBU 4200 17/09/2007 20:00:00 Lecture 1: Introduction to Globalization Carry Trade Strategy Borrowing in the country with a low interest rate Selling that currency on foreign exchange markets for a currency with a high  interest rate(short sale) Investing in the country with the highest interest rate o This process: Weakens the Low rate currency/ Strengthens the high  interest rate currency Globalization: the act of becoming worldwide in scope Increasingly freer flow of goods, services, companies, people, capital Impacts:  o Target markets where companies buy and sell goods o Where companies source factors of production(Financing) Financial market Globalization process: the integration of a country’s  domestic financial system into the international arena o Individual domestic financial markets become integrated with others  that can be considered as a single market Financial markets: Function as one integral whole o Represented by: large trading volumes across borders Securities of different nations trading in major financial centers Financial events having ripple effects in different countries Companies look for funding possibilities in financial markets  around the world History of Globalization Period after WWII slow return to globalization process o GATT formed to reduce tariffs and expand world trade o Bretton Woods: Goal to stabilize exchange rates Accomplished through fixed exchange rates o International Monetary Fund IMF Goal to maintain exchange rate by assisting countries who’s  currencies were under attack by providing short term funds for  intervention
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Quiz 1 - INBU 4200 Lecture 1: Introduction to Globalization...

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