International Business Study Guide
Exam 1 Guide
A. Current issues with the IMF 1. Currency crises: coming up 2. Issues: a) Credibility/inappropriate policies 1) Leadership 2) Recommended Practices 3) Voting power allocation a) U.S. and Europe possess extreme amount power; If the IMF wants to pass a decision, they need to get the support of EU and US b) Moral Hazard? 1) Dismantle the organization: Don’t Manage the economy and let your inflation get to high but if it does occur, they have a safety net if they do something wrong c) Lack of accountability? I. The Role of the World Bank A. World Bank (IBRD) role- International Bank for restruction and Development 1. Refinanced post-WWII resconstruction and development 2. Provides low-interest long term loans to developing economies B. The International Development Agency (IDA), arm of the bank created in 1960 1. Raises funds from member states 2. loans only to poorest countries 3. 50 year repayment at 1% per year interest C. Issues related the World Bank 1. Voting Power 2. Accountability a) No accountability; a country may follow the the guidelines but corruption usually is involved and it ultimately results in the country becoming more engrained in debt 3. Future role?
Currencies in Crisis I. Questions: A. What were the causes of the Asian Financial Crisis? 1. Japanese economy was a bubble economy; it was slow to adapt to changes (closed economy/culture) 2. Government played a major role 3. Thailand kept its currency artificially high a) Thailand currency was fixed to the dollar; people began to question whether they could actually back up what they are saying. b) More and more people started to ask for the currency and the country did not have enough. 1) Eventually they had to devalue their currency
A. Current issues with the IMF 1. Currency crises: coming up 2. Issues: a) Credibility/inappropriate policies 1) Leadership 2) Recommended Practices 3) Voting power allocation a) U.S. and Europe possess extreme amount power; If the IMF wants to pass a decision, they need to get the support of EU and US b) Moral Hazard? 1) Dismantle the organization: Don’t Manage the economy and let your inflation get to high but if it does occur, they have a safety net if they do something wrong c) Lack of accountability? I. The Role of the World Bank A. World Bank (IBRD) role- International Bank for restruction and Development 1. Refinanced post-WWII resconstruction and development 2. Provides low-interest long term loans to developing economies B. The International Development Agency (IDA), arm of the bank created in 1960 1. Raises funds from member states 2. loans only to poorest countries 3. 50 year repayment at 1% per year interest C. Issues related the World Bank 1. Voting Power 2. Accountability a) No accountability; a country may follow the the guidelines but corruption usually is involved and it ultimately results in the country becoming more engrained in debt 3. Future role?
Currencies in Crisis I. Questions: A. What were the causes of the Asian Financial Crisis? 1. Japanese economy was a bubble economy; it was slow to adapt to changes (closed economy/culture) 2. Government played a major role 3. Thailand kept its currency artificially high a) Thailand currency was fixed to the dollar; people began to question whether they could actually back up what they are saying. b) More and more people started to ask for the currency and the country did not have enough. 1) Eventually they had to devalue their currency