Summary - International Finance

Summary

• International currency relations constitute a set of institutions of various treaties and rules that determine the methods and factors of international currency settlements. The international currency market is the largest segment of international finance and the world financial system. Banks, performing the role of dealers, provide tight connections of the centers of the currency market and financial markets. The main functions of the international currency market are the transfer of purchasing power, credit, hedging and clearing. In the foreign exchange market, the law of one price dominates, with it involves arbitration between the centers of the foreign exchange market and other currency sectors. The organizational channels through which this arbitration takes place form spot rates.

• Foreign exchange market transactions and transactions include open cash (spot) transactions, open time (forward) transactions and swaps. Interesting arbitrage provides a profit due to the difference in interest rates between two exchange centers and the difference between the swap and forward rates. The spot exchange rate is determined on the basis of floating, fixed and controlled rates. At the same time, supply and demand ultimately affect exchange rates, especially when they affect floating rates. In the general model of international monetary relations, four basic variables are interacting: spot rate, forward rate, interest rates and levels of information.

• The international currency market closely interacts with international credit and international stock markets - all these three markets are constituent parts (sectors) of the international financial market. Moreover, the prerequisites and conditions for their formation are the same, therefore historically they began to be created simultaneously, reflecting the needs of the development of international factors of production and the international movement of capital.

• An important function of the international foreign exchange market is the regulation of currency liquidity and balance of payments. Currency liquidity is the country's ability to ensure the fulfillment of its international obligations, paying them off in accordance with the conditions for obtaining borrowed foreign exchange.

• The world monetary system has been formed for almost two last centuries. It evolved from various regional systems and alliances, from the Paris system, which operated on the basis of the gold and currency standard (1816-1914) for a whole century, to the Genoese system (1922-1944) and, finally, the Bretton Woods (since 1945 ).

In subsequent times, it introduced various innovations, the most significant of which were adopted during the Jamaica International Conference (1986). World wars and world financial crises have had and have a powerful impact on these changes. Strongest blow to the world monetary system caused a global crisis. In its turn, it was the result of both inefficient activity of the whole system of international finance and the entire world financial and economic policy.

• In the current conditions of intensification of the processes of internationalization of national economies, the international monetary system is the most globalized subsystem of international finance and the world economy. First of all, this concerns the financial systems of countries. Any, the simplest transaction is carried out through the the equivalent of a monetary unit as a measure of value. These specific, vital properties of money as the primary, basic & quot; cells & quot; (monetary) system caused its special dynamism in the process of internationalization of world finances, served as a basis for the ongoing process of globalization (note that financial globalization became the central link of the whole world economic globalization). In some cases, the emergence of separate regional links in international financial integration has become very profound (for example, the EU countries, in particular the eurozone). Here, all national financial systems, while maintaining a certain autonomy, are, in fact, integrated into a single financial ( currency ) system. The composition and structure of the international monetary system have a complex character in which each link plays a significant role, but a system of exchange rates should be specially emphasized.

• The main task of the functioning of the world monetary system and its subjects, as well as in general international finance, is the streamlining of loan capital and the allocation of credit resources through global channels of world finance. The US loan market and the market for European loans and bonded loans occupy a dominant position in the world's financial flows. However, the system failed to cope with the task, which resulted in a powerful financial and economic crisis that began in 2008 and has not yet come to an end.

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