Pearson Education, Inc. © 2006 CHAPTER 9 Money and Business INTERNATIONAL RELATIONS Seventh Edition Joshua S. Goldstein

Pearson Education, Inc. © 2006 The Currency System Hard or convertible currencies Fixed exchange rates Floating exchange rates Managed float system G7 states Inflation Hyperinflation

Pearson Education, Inc. © 2006 Inflation Rates by Region,

Pearson Education, Inc. © 2006 Why Currencies Rise and Fall Strong and weak currencies Overvalued currencies Devaluation Central banks Discount rate

Pearson Education, Inc. © 2006 The World Bank and the IMF 1944, The Bretton Woods System World Bank, source of loans International Monetary Fund, maintain stable currencies U.S. Dollar backed by gold until 1971 Special Drawing Rights (SDR) Balance of payments Foreign direct investment International debt

Pearson Education, Inc. © 2006 The Position of Various Regions The United States National debt Russia Declining GDP Asia

Pearson Education, Inc. © 2006 U.S Financial Position,

Pearson Education, Inc. © 2006 Economic Collapse in Russian and Eastern Europe

Pearson Education, Inc. © 2006 Multinational Corporations (MNCs) Industrial, financial, and service corporations Foreign direct investment Offering incentive for investment Risk assessment Stability Corruption