This website uses cookies to ensure you have the best experience. Learn more

Global Financing & Exchange Rate Mechanisms Paper

714 words - 3 pages

Global Financing and Exchange Rate MechanismsCountertradeCountertrade is a trade between two countries by which goods are exchanged for other goods rather than for hard currency. Countertrade is often the solution for exporters that may not be able to be paid in his or her home currency and according to the text few exporters would desire payment in a currency that is not convertible."Sometimes both parties are happy with the goods they receive, other times one country will liquidate the received asset, ultimately receiving cash in the deal. This is also referred to as "using barter to complete a trade." (www.investopedia.com)An example of countertrade is, the former Soviet Union would often countertrade, agreeing to trade, say, Soviet oil for another country's vehicles.After researching I have learned that countertrade is an umbrella term covering a wide range of commercial mechanisms for reciprocal trade. Reciprocal trading (two-sided trading, trade in return) occurs when the trade customers is also a supplier. The reciprocal trading arrangements may or may not be formally linked. In practice, reciprocal trade may strengthen an existing trading relationship, and may even create mutual dependencies, which may create new trade relationship. Barter is probably the oldest and best known example of countertrading, however others, such as offset, buyback, tolling and switch trading, have also evolved to meet the requirements of a more sophisticated world economy. All of these generally involve the exchange of goods or services to finance purchases, rather than using cash alone. "Countertrade, in its various forms, represents 10-15% of world trade." (www.uktradeinvest.gov)"The importance of countertrade as a trading tool has increased since early 1970s -especially in markets where there is a shortage of foreign exchange and countertrade may be the only effective marketing mechanism for doing business." (www.barternews.com)"One of the unique risks of countertrade transactions is that companies often find themselves handling products with which they are not familiar. This is probably the greatest risk in a countertrade transaction." (www.barternews.com)Soft CurrenciesAnother name for "weak currency," there is very little demand for this type of currency and values often fluctuate. Currencies from most developing...

Find Another Essay On Global Financing & Exchange Rate Mechanisms Paper

Global Financing and Exchange Rate Mechanisms

892 words - 4 pages . (www.investopedia.com)Countertrade is an general term covering a wide range of commercial mechanisms for reciprocal trade. Reciprocal trading (two-sided trading, trade in return) occurs when the trade customers is also a supplier. The reciprocal trading arrangements may or may not be formally linked. In practice, reciprocal trade may strengthen an existing trading relationship, and may even create mutual dependencies, which may create new trade

Global Financing and Exchange Rate Mechanisms: Hard and Soft Currencies

1018 words - 4 pages Global Financing and Exchange Rate Mechanisms: Hard and Soft CurrenciesCurrency is an item that is exchanged for goods and services. Currency is in the form of paper bills and coins. These paper bills and coins have monetary value and are considered either hard or soft currency depending on the originating country's government. It's estimated by the Bank for International Settlements that $6.4 trillion is internationally financed by banks around

Global Financing and Exchange Rate Mechanisms - The Big Mac Index

1265 words - 5 pages Global Financing and Exchange Rate Mechanisms 1 Global Financing and Exchange Rate MechanismsGlobal financing and exchange rates have become an important issue for global business. Extreme increases in the price of oil and other commodities and inflation has led to significant exchange rate risks in today's global markets. The following will analyze purchasing power parity and the "Big Mac Index", explain how purchasing power parity and the

Global Financing and Exchange Rate Mechanisms

1174 words - 5 pages governments fail to comply with their own regulations, effectively limiting, delaying, or discouraging repatriation. Currency exchange controls are often a major consideration alsoAccess to Public Sector MarketsIn certain countries, service sectors are still regulated by governments that restrict foreign firms from obtaining government contracts. In such situations, local service firms will receive preference for government contracts, except in

Global Financing and Exchange Rate Mechanisms: Countertrade

600 words - 2 pages Countertrade is a trade between two countries by which goods are exchanged for other goods rather than for hard currency. It can also be described as an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent (Hill, 2006). "The importance of countertrade as a trading tool has increased since early 1970s -especially in markets where there is a shortage of foreign exchange

Global Financing and Exchange Rate Mechanism Hard and Soft Currency

1106 words - 4 pages Global Financing and Exchange Rate Mechanism PAGE \* MERGEFORMAT 3 Global Financing and Exchange Rate MechanismHard and Soft CurrencyGlobal Financing and Exchange Rate Mechanism Hard and Soft CurrencyLa moneda es un elemento que se intercambia por bienes y servicios. La moneda se encuentra en forma de billetes y monedas. Estos billetes y monedas tienen valor monetario y son consideradas como moneda dura o suave dependiendo del gobierno del pa

Global Financing and Exchange Rate Mechanisms Paper How it is used in global financing operations, and its importance in managing risks

791 words - 3 pages foreign exchange reserves. Countertrade is a common solution for these payment problems.CountertradeCountertrade is a term used to cover a wide range of reciprocal trade. Barter is the best-known example and others such as offset, buyback and switch trading have been developed to meet the needs of the world economy. These trade methods involve the exchange of goods or services in order to finance purchases rather than using cash. Reasons for

Regional Integration For and Against Articles MGT/448

1279 words - 5 pages Global Financing and Exchange Rate Mechanisms 1 Global Financing and Exchange Rate MechanismsGlobal financing and exchange rates have become an important issue for global business. Extreme increases in the price of oil and other commodities and inflation has led to significant exchange rate risks in today's global markets. The following will analyze purchasing power parity and the "Big Mac Index", explain how purchasing power parity and the

Discuss the significance of the birth of the Euro. Would you value it as a benefactor or malefactor for European countries' economy? Use examples to support your argument

6880 words - 28 pages suffer specific asymmetric shocks, and if alternative adjustment mechanisms, such as wage flexibility, do not work, they could suffer some decline in growth and employment (Lavrač, 2003). In Hungary, fiscal policy has played a dominant role in determining exchange rate fluctuations. However, the EU accession changed the fiscal position and influenced expectations about the sustainability of macroeconomic policies in general and of the

Gap Analysis: Lester Electronics

3252 words - 13 pages in place.LEI has decided to merge with Shang-Wa, as a stable and profitable company this merger will give Shang-Wa the finances required to remain competitive. One financing problem presented is the rate of growth for LEI compared to Shang-Wa, a basic rule to acquisition evaluation is to ensure NPV to shareholders is positive. Mergers do not always transpire amicably; in this paper I will show how LEI and Shang-Wa will move full force with this

Foreign Exchange Markets Summary

1855 words - 7 pages losses in the long run, and businesses and investors will be more likely to calculate what exchange rate relations will be several years into the future (Greenhouse, S., 2008).The International Monetary Fund (IMF) monitors exchange rates from fluctuating to rigorously, and to aid in the import and export of goods between countries by providing credit for financing international trade. According to International Money Fund (2007)… some of the

Similar Essays

Global Financing And Exchange Rate Mechanisms Paper

887 words - 4 pages IntroductionIn this paper, will describe and analyze hard and soft currencies and how they are used in global financing operations. We will also describe their importance in managing risks.Hard and Soft CurrencyHard currency is the currency that is backed by gold reserves and is readily convertible into foreign currencies. (Infoplease.com, 2006) This means that hard currency is a currency that is a stable standard of exchange and security. The

Global Financing And Exchange Rate Mechanisms

1016 words - 4 pages Global Financing and Exchange Rate Mechanisms Global Financing and Exchange Rate MechanismsJoseph RehmanApril 19, 2010University of PhoenixMGT 488Global Financing and Exchange Rate MechanismsIntroductionIn this paper we will discuss hard and soft currencies. A currency is something that is exchanged for a good or a service. Most times this can be in the form of a paper bills and coins. The must have a monetary value, which that can either be a

Global Financing And Exchange Rate Mechanisms 999 Words

999 words - 4 pages organizations can conduct business throughout with minimal chance of disruption, creating a more stable economic environment, which creates attractive opportunities for foreign investors.Since the introduction of the euro, cross-border trading in the EU has accelerated. (Global Economics, 1999) Without currency matching rules and exchange rate risk, financing costs have been reduced. Another important development has been the rapid growth of new market

Global Financing And Exchange Rate Mechanisms 749 Words

749 words - 3 pages in part because of the political or economic uncertainty within soft currencies country of origin. (Answers.com, 2009) Investopedia says the governments of developing countries will often set unrealistically high exchange rates by "Pegging" or attaching their countries currencies exchange rate to that of another country such as the United States.The U.S. dollar along with the British pound are good examples of a hard currency. Hard currencies