International Finance

Nguyn Phc Hin, Ph.D

Banking and Finance Faculty
Hanoi Foreign Trade University

References

Intructors Slide

Levi, Maurice International Finance, 4th
Ed,2005

Pilbeam, KeithInternational Finance 3rd Ed,
2006

Melvin, Michael International Money and
Finance,Boston, 2004

Ti chnh quc t, PGS. TS Nguyn Vn Tin,
NXB Thng k, 2010

Journals of Finance and Banking, Economics

Website: Bloomberg, Reuter, FX
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Grading assessment

Attendance
10% of final grade
Mid-term test
30% of final grade
Final exam
60% of final grade
Bonus (only for students who have good
answers to practice problems at class):0,5
point adding to final exam

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Aims of the Lecture

To gain insight into the world of international
capital flows and exchange rates and their
influence on the macroeconomic performance.
To understand the interaction between highly
complex currency markets and public agents
(central bank and Ministries of Finance).
To explain phenomena like asset market booms
and financial crisis.

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Approach of the Lecture

Explanation of exchange rate theories
and policies
Verification on the basis of
-

Macroeconomic data (time series and

international comparison)
Econometric models

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Outline
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.

Overview of International Finance

Foreign Exchange (Currency) Market
Factors Affect Exchange Rate
Exchange Rate Policy and Exchange Rate Regime
Interest Rate Parity and Purchasing Power Parity
Other Exchange Rate Models
Balance of Payment
Monetary and Fiscal Policies in an Open Economy
International Monetary System and International
Financial Institutions
X.
International Financial Markets
XI. Financial Crisis
XII. The Issue of Exchange Rate in Vietnam
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Lin h
 Email: phuchienth@yahoo.com
 Mobile: 0166 541 1439

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I. Overview of International
Finance
1. Fundamentals of International Finance
2. The Growing Importance of International
Finance
3. Benefits of Studying International
Finance

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1. Fundamental of Inter Finance

 Open Economy:
 International Trade Flow (Importexport)
 International Capital Flow (Direct and
Indirect Investments)

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1. Fundamental of Inter Finance

XK + NK
Economy openess index = ---------GDP

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1. Fundamental of Inter Finance

Openness of Economy
( Ratio of export and import to GDP)

2,5
2
1,5
1
0,5
0
Vietnam

China

Thailand

Malaysia

Philippines

Indonesia

Source: ADB and IMF

1990

2006

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1. Fundamental of Inter Finance

Export Growth, Annual Change
40

30

20

10

0
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

-10

-20
Source: ADB, 2010

Vietnam

China

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Thailand

Korea

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2. The Growing Importance of

International Finance
 The growth of international trade

The world trade has grown by 6% per annum

since 1950, roughly twice that of world GDP
(45,941.8 bill USD-2006)
Imports increased from 315 bill USD (1970) to
13,506 bill USD (2006), or higher 35 times

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2. The Growing Importance of

International Finance
Reasons for growing international trade:
 A liberalization of trade and investment via
reducing in tariff, quotas, currency controls and
others
 An unprecedented shrinkage of economic
space via rapid improvements in
communications and transportation
technologies and consequent reduction in costs
(95% since 1920)

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2. The Growing Importance of

International Finance
 Increased Globalization of Financial and Real
Asset Markets







In line with the growing importance of

international trade, there has been a parallel
growth in the importance of foreign investment
in the money market, the bond market, the
stock market....
Operation via the world financial centers
Efficency of the global allocation of capital flow
Reducing investment risk
Increasing Exchange rate risk and country risk
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2. The Growing Importance of

International Finance
 Increased volatility of exchange rate
 Improving exchange rate forecast
 Diversifying currencies
 Derivatives

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3. Benefits of Studying International

Finance





For
For
For
For

policy makers
financial managers at MNC
currency brokers, speculators, investors
student of economics, finance

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