Global Finance Currency Questions
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1. How does the existence of foreign exchange and/or derivative markets impact an organization's globalization strategies?
How does the non-existence of foreign exchange and/or derivative markets impact an organization's globalization strategies?
How do catastrophic world events affect the foreign exchange and derivative markets?
2. What are international parity conditions? What are some examples of international parity conditions? How do these conditions impact global business?
3. What is currency? How do fluctuating currency rates affect global trading? Provide a real-world example in your response.
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Solution Summary
The solution discusses how currency, parity and foreign exchange affects globalization and its organization.
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(1) Global trading is the key to any globalization strategy. Originally trading of goods was conducted against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually a variety of paper IOU started gaining popularity as an exchange medium.
The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves. This came to be known as the gold standard. The Bretton ...
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