Introduction to International Financial Markets

Introduction to International Financial Markets Free

By UNITAR
8 Lessons
4.7
(6 reviews)

Understand the global negotiating environment, prepare for multilateral, bilateral and commercial negotiation situations as well as weigh the relative advantages and disadvantages of a particular financial transaction.

Introduction to International Financial Markets course excerpts

International Financial Markets and Financial Flows to Developing Countries

Introduction to International Financial Markets Course - Lesson Excerpt

International Financial Markets and Financial Flows to Developing Countries

International Financial Markets and Financial Flows to Developing Countries

This course is made possible through the generous financial support of the Arab Gulf Program for Development (AGFUND). _For more information visit the Global Platform on Financial Inclusion _

International Financial Markets and Financial Flows to Developing Countries

Course Objectives By the end of this course, you should be able to: Understand how international finance has evolved over the past half century and the opportunities and risks it offers to developing countries. Have a sense of the state of financial flows to developing countries and of trends within these flows. Have familiarity with some basic terms and concepts that are relevant to an understanding of the subject matter of this course.

The first part is an overview of the history of international finance in the post Second World War period.

International Financial Markets and Financial Flows to Developing Countries

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

Introduction to International Financial Markets Course - Lesson Excerpt

Part 1: A Brief History of International Finance and Description of the Post 1971 Order

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

The Post Second World War system was based on the agreements reached at the Bretton Woods Conference in 1944 at which the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) were established.

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

This system required each participating state to establish a "par value" for its currency. The par value was to be determined in reference to the U.S. Dollar, whose value was set at $35 to an ounce of gold.

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

This meant, for example, that governments regulated the interest rates that banks could charge their borrowers and pay their depositors.

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

At the Bretton Woods Conference in 1944 which two organizations were established ?

Which of these was relatively fixed during the Bretton Woods era?

The Post 1971 Order Part 1: International Financial Markets (1972 to mid-1980s)

Under this new system, each country was free to choose whatever exchange rate system it wished, with the one exception that they could not set the value of their currency in terms of gold. The result was that most countries moved to more flexible exchange rate systems.

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

They also began to remove restrictions on access to their financial markets.

Part 1: A Brief History of International Finance and Brief Description of the Post 1971 Order

Five Critical Developments that Help Explain the Evolution in International Financial Markets

Introduction to International Financial Markets Course - Lesson Excerpt

Five Critical Developments that Help Explain the Evolution in International Financial Markets

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

Since the end of the Bretton Woods era, there have been five developments that have influenced the evolution of financial markets. These five developments are: Technology 2. Deregulation 3. Securitization & Disintermediation 4. Changing Market Actors 5. Expanded Range of Financial Instruments

Technology

The dramatic developments in information and communication technologies that have occurred over the past two decades have facilitated the globalization of finance.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

These countries were reacting to pressures from financial institutions who wanted to respond more effectively to the needs of their clients whose activities were becoming increasingly multinational and to the changes that were taking place in financial markets.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

One consequence of deregulation has been a substantial increase in international capital movements.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

What is the consequence of the improvement in technology used in international financial transactions?

Securitization and Disintermediation

Over the past twenty years there has been a trend towards structuring financial transactions so that the creditors can trade the financial instruments representing the debt transaction rather than having to hold the debt to maturity. This trend has been accentuated by two related phenomena.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

The second phenomenon is disintermediation, which refers to the fact that both savers and borrowers are making less use of financial intermediaries such as banks in making their financial transactions.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

Similarly, borrowers are discovering that they can raise funds from these asset management vehicles and such other financial institutions as insurance companies, in addition to commercial and investment banks.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

What is deregulation?

Changing Market Actors The changes we have described have led to an expansion in the number of actors in international financial markets who are interested in providing funding to developing countries. The new players include mutual funds, unit trusts, insurance companies, pension funds, and individuals. The presence of these new actors has a number of implications for developing countries.

For example, in addition to standard loan agreements, borrowers can now obtain funds utilizing a range of securities.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

These securities, in addition to coming in different currencies and with different maturities, may also have features that allow the holders or the issuers to structure the transaction to more closely meet their particular needs.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

One consequence of the increased use of derivatives has been to strengthen the links between different financial markets and different financial actors.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

It makes it possible for each of the original parties to a transaction to convert their bilateral transaction into a complex inter-linked network of transactions with entities active in different markets.

 Five Critical Developments that Help Explain the Evolution in International Financial Markets

Which are examples of a new actor in international financial markets? Select 3 answers

The Impact of These Developments on Developing Countries

Introduction to International Financial Markets Course - Lesson Excerpt

The Impact of These Developments on Developing Countries

The Impact of These Developments on Developing Countries

The developments described in the previous lesson have had a number of impacts that are relevant to developing countries.

As a result, national regulators cannot assume that all the holders of their debt instruments are citizens or residents of their jurisdiction. Some of them may be foreigners who are largely outside the scope of their jurisdiction.

The Impact of These Developments on Developing Countries

This has obvious implications for monetary policy, debt and financial management and for the regulation of financial institutions and financial markets.

The Impact of These Developments on Developing Countries

A second consequence is that financial markets have become stratified so that different categories of potential borrowers have very different levels of access to the markets.

The Impact of These Developments on Developing Countries

The Challenges for International Finance and Financial Flows to Developing Countries

Introduction to International Financial Markets Course - Lesson Excerpt

The Challenges for International Finance and Financial Flows to Developing Countries

The Challenges for International Finance and Financial Flows to Developing Countries

Some of these challenges include:

How to deal with increased uncertainty and the volatility of international financial flows? This challenge places a premium on risk management and effective regulation.

The Challenges for International Finance and Financial Flows to Developing Countries

How to ensure that poor countries that are dependent on official sources of funds are able to obtain access to sufficient funds? This also implicates the issue of global economic governance because it raises the issue of how should these official sources use and can be held accountable for the use of their increased power over those member states that have become more dependent on their funds?

The Challenges for International Finance and Financial Flows to Developing Countries

How to deal with the income and wealth inequalities that seem to be a feature of modern life both within countries and between countries and that seems to be related to the changes in access to and allocation of credit that have occurred over time?

The Challenges for International Finance and Financial Flows to Developing Countries

New Initiatives

Part 2: An Overview of Financial Flows to Developing Countries

Introduction to International Financial Markets Course - Lesson Excerpt

Part 2: An Overview of Financial Flows to Developing Countries

Part 2:  An Overview of Financial Flows to Developing Countries

Global flows of FDI will be under severe pressure this year as a result of the COVID-19 pandemic.

Part 2:  An Overview of Financial Flows to Developing Countries

Flows to developing countries will be hit especially hard, as export-oriented investments and manufacturing-linked investments are among the most seriously affected.

Part 2:  An Overview of Financial Flows to Developing Countries

Key Concepts Related to Flows of Funds

Official v. Private Sources of Funds: Official sources are funds that are provided by the public sector. It includes governments and their agencies and instrumentalities, and international organizations.

Part 2:  An Overview of Financial Flows to Developing Countries

Summary and Glossary

Introduction to International Financial Markets Course - Lesson Excerpt

Summary and Glossary

Summary and Glossary

During this period, most countries imposed restrictions on international financial flows especially capital movements.

Summary and Glossary

Major international institutional agreements after World War II, such as the Bretton Woods agreement, liberalized international trade but did not do much to free the movement of international capital flow.

Summary and Glossary

That situation changed dramatically in the 1970s, and the pace of change accelerated during 1980s.

Summary and Glossary

There were five developments that have influenced the evolution of financial markets as illustrated in this module.

Summary and Glossary

These developments have led to massive international capital flows across boundaries. At the same time, the structure and operation of international financial markets have been transformed.

Summary and Glossary

Nowadays, international financial markets are highly integrated, and transactions have become increasingly complex.

Summary and Glossary

The developments described in this module have increased the growing integration of the developing market economies into global financial markets.

This has been significantly affected by the role that the international financial institutions - particularly the WB and IMF play in international finance, as it will be studied in the next modules.

Quiz: Introduction to International Financial Markets

Introduction to International Financial Markets Course - Lesson Excerpt

Introduction to International Financial Markets: Quiz

Quiz: Introduction to International Financial Markets

Introduction to International Financial Markets Course Author

UNITARThe United Nations Institute for Training and Research (UNITAR) is a dedicated training arm of the United Nations system.

Generally cursory and introductory but touched on enough areas of international finance.

It's a great presentation I received and went through the course. It's actually convincingly and it grabbed my attention.

Other courses by UNITAR

EdApp is easy to use and free for you and your team. No credit card required.

or book a demo with us today!