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International Business, 8th Edition by Michael H. Moffett, Iikka A. Ronkainen, Michael Czinkota

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CHAPTER 7

Global Financial Markets

CHAPTER CONTENTS & LEARNING OBJECTIVES

THE GLOBAL FINANCIAL MARKETPLACE

1. To understand how currencies are traded and quoted on world financial markets

THE MARKET FOR CURRENCIES

2. To examine the purpose of exchange rates in product, service, and capital markets

EVOLUTION OF THE GLOBAL MONETARY SYSTEM

3. To explore the primary linkage between exchange rates and money markets—LIBOR

THE PURPOSE OF EXCHANGE RATES

4. To understand the distinctions between domestic and international sources of capital

GLOBAL CAPITAL MARKETS

5. To examine how the needs of individual borrowers have changed the nature of the instruments traded on world financial markets

THE FINANCIAL CRISIS OF 2007–2009

6. To understand the origins and implications of the 2007–2009 global financial crisis and the road ahead

Global Capital Markets: Entering a New Era

The current financial crisis and worldwide recession have abruptly halted a nearly three-decade-long expansion of global capital markets. From 1980 through 2007, the world's financial assets—including equities, private and public debt, and bank deposits—nearly quadrupled in size relative to global GDP. Global capital flows similarly surged. This growth reflected numerous interrelated trends, including advances in information and communication technology, financial market liberalization, and innovations in financial products and services. The result was financial globalization.

But the upheaval in financial markets in late ...

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