International Finance For Dummies

Nowadays the value of daily foreign exchange trading is more than one hundred times the value of annual international trade in goods and services. As result of the great importance of international financial transactions, the subject of international finance continues to develop as fast as—or faster than—any other field in economics and finance. International Finance For Dummies sheds light on this increasingly important subject for the growing number of students required to take this course.

If you're an undergraduate or MBA student enrolled in an international finance course, this hands-on, friendly guide gives you everything you need to succeed. Plus, it includes up-to-date information on the latest changes to International Finance Reporting Standards, its impact on a company's overall finances, and the various currencies and institutions available worldwide.

• Serves as an excellent supplement to your international finance texts
• Provides easy-to-understand explanations of complex material
• Brings you up-to-speed on the concepts and subject matter you need to know

International Finance For Dummies is your ticket to scoring your highest in your international finance course.

Introduction 1

Part I: Getting Started with International Finance 9

Chapter 1: Money Makes the World Go ’Round 11

Chapter 2: Mastering the Basics of International Finance 21

Chapter 3: Buy, Sell, Risk! Users of Foreign Exchange Markets 39

Chapter 4: It’s All about Change: Changes in the Exchange Rate 51

Part II: Determining the Exchange Rate 69

Chapter 5: It’s a Matter of Demand and Supply 71

Chapter 6: Setting Up the Monetary Approach to Balance of Payments 87

Chapter 7: Predicting Changes in Exchange Rates Based on the MBOP 115

Part III: Understanding Long-Term Concepts and Short-Term Risks 135

Chapter 8: Your Best Guess: The Interest Rate Parity (IRP) 137

Chapter 9: Taking a Bite Out of the Purchasing Power Parity (PPP) 155

Chapter 10: Minimizing the FX Risk: FX Derivatives 167

Part IV: Conducting a Background Check: Changes in Currency through the Years 189

Chapter 11: Macroeconomics of Monetary Systems and the Pre-Bretton Woods Era 191

Chapter 12: The Bretton Woods Era (1944–1973) 211

Chapter 13: Exchange Rate Regimes in the Post–Bretton Woods Era 227

Chapter 14: The Euro: A Study in Common Currency 255

Part V: The Part of Tens 271

Chapter 15: Ten Important Points to Remember about International Finance 273

Chapter 16: Ten Common Myths in International Finance 279

Appendix: Famous Puzzles in International Finance 285

Index 293

Ayse Y. Evrensel, PhD, is an associate professor of Economics at Southern Illinois University. She is a member of the American Economic Association, Western Economic Association, European Union Studies Association, and Committee on the Status of Women in the Economics Profession.

Learn to:

• Master complex theories and simplify calculations
• Find ways to hedge against foreign exchange risk
• Navigate the complexities of world currencies and exchange rates

Get the most out of your International Finance course

International Finance For Dummies sheds light on this increasingly important subject for the growing number of students required to take this challenging course. It includes need-to-know information for understanding the foundations of international finance, factors that affect and influence exchange rates, and how real-time connectedness impacts the global economy.

• International Finance 101 — grasp the basics of exchange rates, the relevance of exchange rates for all sorts of international business, and how macroeconomic variables affect the changes in exchange rates
• Predict change — find plain-English explanations of the Monetary Approach to Balance of Payments (MBOP) and how you can use it to predict the change in the exchange rate
• Get rid of guesswork — discover the concepts of the Interest Rate Parity and Purchasing Power Parity and how they provide the extent of changes in the exchange rate
• Go international — get to know exchange rate regimes and alternative international monetary systems through underlying macroeconomic subjects

Open the book and find:

• The impact of globalization
• The greater connectedness of national economics and the world economy as a whole
• Exchange rates and how they impact corporate firms and governments
• The influence of multinational corporations on the global financial scene
• Famous puzzles in international finance
• Do's and don'ts in international finance