National stock exchanges and bond markets facilities

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National Stock Exchanges and Bond Markets . Facilities for trading securities and bonds. International Business: The New Realities 11-18 The stock exchange in Santiago, Chile
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Key Participants in the Monetary and Financial Systems Commercial Banks . Lend money to finance business activity, play a key role in nations’ money supplies, and exchange foreign currencies. Central Banks . Regulate money supply, issue currency, manage exchange rates, control national reserves. Bank for International Settlements . Supervises Central Bank monetary policy and other activities. International Business: The New Realities 11-19
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Global Financial Crisis In 2008, a major crisis emerged in the global financial and monetary systems. It initially arose in the U.S., when investors lost confidence in the value of securitized home mortgages. Banks, lenders and insurance companies became volatile, and stock markets crashed worldwide. Many national economies sank into recession. The world experienced sharp declines in consumer wealth, economic activity, and international trade. International Business: The New Realities 11-20
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Global Financial Crisis (cont’d) A key factor in the crisis was the availability of ‘easy money’, from the U.S. Federal Reserve Bank. Also, China and other emerging markets had been investing huge sums in U.S. government securities. These trends led to the build-up of a vast global money supply, which facilitated high demand for housing and commodities such as oil and food, leading to inflation Much of the money was used to finance the huge U.S. trade deficit. International Business: The New Realities 11-21
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Global Financial Crisis (cont’d) Many bad mortgages were ‘securitized’ – bundled into investment assets and sold in global financial markets. However, over time, investors realized that many loans were high-risk, which led to capital flight . Like a contagion, the crisis spread quickly to Europe and beyond. As the global economy slowed, demand for exports shrank and export-dependent countries floundered (e.g., Japan, Mexico, countries in Eastern Europe). International Business: The New Realities 11-22
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Global Financial Crisis (cont’d) National governments, the IMF, and World Bank took corrective measures, such as injecting massive sums into national economies and launching aid packages. Some countries imposed trade and investment barriers. The crisis highlights the importance of strong regulation , transparency , and supervision of institutions in the global financial system. International Business: The New Realities 11-23
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