International Finance

Abstract

There were innumerable turbulences in the world economy and business growth during the twentieth century, with both internal and external structural adjustments to regulate financial inflows and outflows between countries. In addition to the First and Second World Wars, the great depression of 1930s steered political and economic thinkers to arrive at a business-linked economic growth philosophy and build an international organization for surveillance of monetary and economic imbalances. Several countries around the world faced three economic contractions in 1920, 1923, and 1926 that lasted together for over fifteen months. In November 1930, another series of crises emerged among commercial banks that turned a sporadic economic recession into the Great Depression. This recessionary situation had a prolonged effect on the trade and economy of several countries, which was further prompted by the Second World War from 1939 to 1945. The post-war effects hobbled the economy of most countries and destroyed international market operations.

Conducting business in global markets has become much easier for companies since the mid-twentieth century because of simple and secured management of financial resources. Regional and global financial markets turned vulnerable after the Second World War due to domestic inflation, declining exports, unstable foreign exchange rates, low purchasing power parity of countries, and increasing commercial rates of interest. This chapter addresses the role of international financial organizations in managing balance of payments and balance of trade paradoxes, and explains how to develop crucial strategies to protect the financial interest of companies during market uncertainties by using financial and arbitrage strategies. This strategy framework helps managers to tailor financial portfolios, options, and equity management strategies. The chapter offers a discipline for thinking rigorously and systematically about managing financial strategies during market uncertainties.