International Money and Finance, Eighth Edition

* '' International Money and Finance is an excellent resource for both international and multinational finance courses. The combined coverage of both topics - the environment of international financial institutions and instruments, and financial management tools for multinational corporations - makes it easier for students to grasp the impact of both on businesses that increasingly operate in a global environment.''--Anne M. Alexander, University of Wyoming ''This latest edition of the best-selling book discusses a number of important and somewhat complex concepts in international money and finance in a succinct, lucid yet analytical manner.''--Ramkishen S. Rajan,George Mason University andNational University of Singapore ''The authors do an exceptional job of including this extensive range of topics in international money and finance, which provides high-level perspective on the global economy. I expect it will be a standard textbook for instruction and reference over the years.''--Suleyman Degirmen, Mersin University ''A concise, well-written, rigorous but at the same time easily accessible exposition of international finance.'' --Firat Demir, University of Oklahoma ''This textbook is an excellent source for graduate and advanced undergraduate students around the world. The authors have carefully prepared each chapter with updated information on various financial issues, including risk management and banking''. --Viviana Fernandez,Universidad Adolfo Ibañez Front Cover......Page 1 International Money and Finance......Page 4 Copyright Page......Page 5 Contents......Page 6 Preface......Page 12 Acknowledgments......Page 14 Finance and the Multinational Firm......Page 16 The Actors......Page 17 Plan of Attack......Page 18 I. The International Monetary Environment......Page 20 Foreign Exchange Trading Volume......Page 22 Geographic Foreign Exchange Rate Activity......Page 23 Spot Exchange Rates......Page 26 Currency Arbitrage......Page 29 Short-term Foreign Exchange Rate Movements......Page 32 Long-term Foreign Exchange Movements......Page 35 Summary......Page 37 Exercises......Page 38 Appendix 1A:Trade-weighted Exchange Rate Indexes......Page 39 Appendix 1B: The Top Foreign Exchange Dealers......Page 42 The Gold Standard: 1880 to 1914......Page 44 The Interwar Period: 1918 to 1939......Page 46 The Bretton Woods Agreement: 1944 to 1973......Page 47 Central Bank Intervention during Bretton Woods......Page 49 The Breakdown of the Bretton Woods......Page 51 The Transition Years: 1971 to 1973......Page 52 International Reserve Currencies......Page 53 Floating Exchange Rates: 1973 to the Present......Page 58 Currency Boards and “Dollarization”......Page 60 The Choice of an Exchange Rate System......Page 63 Optimum Currency Areas......Page 67 The European Monetary System and the Euro......Page 68 Summary......Page 70 Exercises......Page 71 Appendix 2A: Current Exchange Practices of Specific Countries......Page 72 3 The Balance of Payments......Page 78 Current Account......Page 81 Financing the Current Account......Page 84 Additional Summary Measures......Page 87 Transactions Classifications......Page 88 Balance of Payments Equilibrium and Adjustment......Page 90 The U.S. Foreign Debt......Page 93 How Bad is the U.S. Foreign Debt?......Page 94 Summary......Page 98 Exercises......Page 99 Further Reading......Page 100 II. International Parity Conditions......Page 102 4 Forward-looking Market Instruments......Page 104 Forward Rates......Page 105 Swaps......Page 106 Futures......Page 110 Options......Page 113 Recent Practices......Page 116 Summary......Page 117 Exercises......Page 118 Further Reading......Page 119 Reasons for Offshore Banking......Page 120 Libor......Page 122 Interest Rate Spreads and Risk......Page 124 International Banking Facilities......Page 125 Offshore Banking Practices......Page 127 Summary......Page 130 Further Reading......Page 131 Interest Parity......Page 134 Exchange Rates, Interest Rates, and Inflation......Page 138 Expected Exchange Rates and the Term Structure of Interest Rates......Page 140 Summary......Page 143 Further Reading......Page 144 What are logarithms?......Page 145 Why use logarithms in financial research?......Page 146 7 Prices and Exchange Rates: Purchasing Power Parity......Page 148 Absolute Purchasing Power Parity......Page 149 The Big Mac Index......Page 150 Relative Purchasing Power Parity......Page 152 Time, Inflation, and PPP......Page 153 Deviations from PPP......Page 154 Overvalued and Undervalued Currencies......Page 158 Real Exchange Rates......Page 162 Summary......Page 163 Further Reading......Page 164 Appendix 7.A: The effect on PPP by relative price changes......Page 165 III. Risk and International Capital Flows......Page 168 Types of Foreign Exchange Risk......Page 170 Foreign Exchange Risk Premium......Page 174 Market Efficiency......Page 178 Foreign Exchange Forecasting......Page 179 Summary......Page 182 Further Reading......Page 183 Financial Control......Page 186 Cash Management......Page 188 Letters of Credit......Page 191 An Example of Trade Financing......Page 193 Intrafirm Transfers......Page 195 Capital Budgeting......Page 197 Summary......Page 200 Exercises......Page 201 Appendix 9A: Present Value......Page 202 Portfolio Diversification......Page 204 Reasons for Incomplete Portfolio Diversification......Page 208 International Investment Opportunities......Page 210 The Globalization of Equity Markets......Page 213 Summary......Page 216 Exercises......Page 217 Further Reading......Page 218 Direct Foreign Investment......Page 220 Capital Flight......Page 222 Capital Inflow Issues......Page 223 International Lending and Crisis......Page 224 International Lending and the Great Recession......Page 228 IMF Conditionality......Page 233 Country Risk Analysis......Page 235 Summary......Page 238 Exercises......Page 239 Further Reading......Page 240 IV. Modeling the Exchange Rate and Balance of Payments......Page 242 Elasticities Approach to the Balance of Trade......Page 244 Elasticities and the J-Curve......Page 248 Currency Contract Period......Page 249 Pass-Through Analysis......Page 251 The Marshall-Lerner Condition......Page 255 The Evidence from Devaluations......Page 257 Absorption Approach to the Balance of Trade......Page 258 Summary......Page 260 Further Reading......Page 261 Internal and External Macroeconomic Equilibrium......Page 264 The IS Curve......Page 265 The LM Curve......Page 268 Equilibrium......Page 270 Shifting the BP Curve......Page 271 Monetary Policy under Fixed Exchange Rates......Page 272 Fiscal Policy under Fixed Exchange Rates......Page 274 Monetary Policy under Floating Exchange Rates......Page 275 Fiscal Policy under Floating Exchange Rates......Page 277 Using the IS-LM-BP Approach: The Asian Financial Crisis......Page 278 International Policy Coordination......Page 281 Summary......Page 283 Exercises......Page 284 Further Reading......Page 285 Appendix 13A: The Open-Economy Multiplier......Page 286 14 The Monetary Approach......Page 290 The Monetary Approach......Page 291 The Monetary Approach to the Balance of Payments......Page 294 Monetary Approach to the Exchange Rate......Page 297 Sterilization......Page 298 Sterilized Intervention......Page 300 Summary......Page 301 Exercises......Page 302 Further Reading......Page 303 15 Extensions to the Monetary Approach of Exchange Rate Determination......Page 304 The Portfolio-Balance Approach......Page 305 The Trade Balance Approach......Page 307 The Overshooting Approach......Page 309 The Currency Substitution Approach......Page 312 Recent Innovations to Open-Economy Macroeconomics......Page 314 Summary......Page 316 Exercises......Page 317 Further Reading......Page 318 Glossary......Page 320 Index......Page 326

Its high-level perspective on the global economy differentiates this introduction to international finance from other textbooks. Melvin and Norrbin provide essential information for those who seek employment in multinational industries, while competitors focus on standard economic tools and financial management skills. Readers learn how to reach their own conclusions about trends and new developments, not simply function within an organization. The 8th edition, newly updated and expanded, offers concise descriptions, current case studies, and new pedagogical materials to help readers make sense of global finance.

• Introduces international finance to readers with diverse backgrounds who want jobs in international investment, international banking, and multinational corporations
• Describes a nuanced view of international finance by drawing on material from the fields of theoretical finance and international macro-finance
• Features 100% revised chapters, new pedagogical content, and online supplementary materials

"Its high-level perspective on the global economy differentiates this introduction to international finance from other textbooks. Melvin and Norrbin provide essential information for those who seek employment in multinational industries, while competitors focus on standard economic tools and financial management skills. Readers learn how to reach their own conclusions about trends and new developments, not simply function within an organization. The 8th edition, newly updated and expanded, offers concise descriptions, current case studies, and new pedagogical materials to help readers make sense of global finance. Introduces international finance to readers with diverse backgrounds who want jobs in international investment, international banking, and multinational corporations Describes a nuanced view of international finance by drawing on material from the fields of theoretical finance and international macro-financeFeatures 100% revised chapters, new pedagogical content, and online supplementary materials."Résumé de l'éditeur Its high-level perspective on the global economy differentiates this introduction to international finance from other textbooks. Melvin and Norrbin provide essential information for those who seek employment in multinational industries, while competitors focus on standard economic tools and financial management skills. Readers learn how to reach their own conclusions about trends and new developments, not simply function within an organization. The 8 th edition, newly updated and expanded, offers concise descriptions, current case studies, and new pedagogical materials to help readers make sense of global finance. Introduces international finance to readers with diverse backgrounds who want jobs in international investment, international banking, and multinational corporations Describes a nuanced view of international finance by drawing on material from the fields of theoretical finance and international macro-finance Features 100% revised chapters, new pedagogical content, and online supplementary materials The international monetary environment The foreign exchange market International monetary arrangements The balance of payments International parity conditions Forward-looking instruments The eurocurrency market Exchange rates, interest rates, and interest parity Prices and exchange rates : purchasing power parity Risk and international capital flows Foreign exchange risk and forecasting Financial management of the multinational firm International portfolio investment Direct foreign investment and international lending Modeling the exchange rate and balance of payments Determinancts of the balance of trade Open economy macroeconomics : the IS-LM-BP approach Open economy macroeconomics : the monetary approach Extensions to the monetary approach of exchange rate determination. Suitable for those who seek employment in multinational industries, this title focuses on standard economic tools and financial management skills. It introduces international finance to readers with diverse backgrounds who want jobs in international investment, international banking, and multinational corporations.