Question

Please discuss the topic of financial capital markets. Please discuss the currency exchange, International Monetary Fund, and World Bank, including their effects on international business deals. Please explain in full detail. Please provide an example to support your answers.

Answer 1

The financial markets are those markets that brings buyers ansd sellers together and thus makes the trade possible. This trade may be traof stocks,derivatives, securities etc. They basically set the prices for global trade, thus helps in fund raising at these prices and also makes possible the transfers/hedging of risk and liquidity.

Financial markets are of two types - Money markets and Capital Markets

Capital markets includes trade of stocks and bonds. They are in turn used for long term investments. Capital markets are most followed markets by investors across the world. Their daily movements are analysed to deas general economic conditions of world markets. As a result, the institutions operating in capital markets – stock exchanges, commercial banks and all types of corporations, including non-bank institutions such as insurance companies and mortgage banks – are carefully scrutinized.

Money markets allows the government and corporate entities to borrow the short term funds usually for assets that are held for upto one year. Money markets are accessed alongwith capital markets. Instead of stock and bonds which are traded in capital markets, the instruments used in the money markets include deposits, collateral loans, acceptances and bills of exchange.

Inetranational Monetary Fund and World Bank -

The International Monetary Fund is an international organization that aims to promote global economic growth and financial stability, to encourage international trade, and to reduce poverty. The International Monetary Fund (IMF) is based in Washington, D.C. and currently consists of 189 member countries, each of which has representation on the IMF's executive board in proportion to its financial importance, so that the most powerful countries in the global economy have the most voting power.

The goals for establishing International Monetary Fund includes

- fostering global monetary cooperation,

- secure financial stability

- facilitate international trade

- promote high employment and sustainable economic growth, and reduce poverty around the world.

IMF adopts following methods to achieve these goals -

Surveillance - The IMF collects massive amounts of data on national economies, international trade, and the global economy in aggregate, as well as providing regularly updated economic forecasts at the national and international level.

Lending - The IMF offers loans to countries that experience economic distress in order to prevent or mitigate financial crises. Members contribute the funds for this lending to a pool based on a quota system adopted by IMF.

Capacity Building - The IMF provides technical assitance, training and policy advice to member countries through its capacity building programs. These programs include training in data collection and analysis, which feed into the IMF's project of monitoring national and global economies.