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Pearson Education, Inc. © 2006 CHAPTER 9 Money and Business INTERNATIONAL RELATIONS Seventh Edition Joshua S. Goldstein 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, 1993-2004 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, 1970-2004 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 Pearson Education, Inc. © 2006
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