Lernmaterialien für International Financial Markets an der Copenhagen Business School

A pattern where the world becomes more aware of the costs of globalisation which took speed out of the integration process

--> DHL Global Connectness Index is on a record high

Offshore banking refers to banking outside of the boundaries of a country.  

There are at least 3 types of offshore banking institutions, which are regulated differently:

1. An agency office in a foreign country makes loans and transfers, but does not accept deposits, and is therefore not subject to depository regulations in either the domestic or foreign country.
2. A subsidiary bank in a foreign country follows the regulations of the foreign country, not the domestic regulations of the domestic parent. 
3. A foreign branch of a domestic bank is often subject to both domestic and foreign regulations, but sometimes may choose the more lenient regulations of the two.

• Expansionary stimulus add to the budget deficit (1.5 bio USD to US)
• Countries with high debt were hit the hardest
  • Greece, Spain, and Portugal bailout
• Austerity policies especially in Europe
• increased inequality
• Rise of populist parties due to rising inequality and austerity
• Politically & regulatory changes
  • reform of the banking system
  • Dodd-Frank Act in the US set higher reserve requirements and made the financial sector it more transparent
  • Three new supervisory bodies in the EU to ensure the EU banking sector was being held properly accountable

--> revealed weak spots of European and US system

Terms of Trade for a country are defined as the ratio between export prices and import prices.

Generally, an improvement in the terms of trade indicates a gain for a country either through higher exports prices or lower import prices.

The emphasize the cyclical pattern in the data and de-emphasize the voilatility of individual indicators, economic indicators are combined into  composite indexes

• There is not the one indicator which can make a solid prediction about both pace & direction of the economy
• clear and more convincing than the behaviour of any individual component

… provide implications about the widespread about a particular business cycle movement, and measures the breadth of that movement

It measures the number of compnent increasing in a given month

• index value of 70 means that 7/10 components were rising
  

With the term "the great Recession/ Financial Crisis" it is referred to the sharp decline in global economic activity which is considered as the most severe economic and financial meltdown since the great depression, from December 2007 until June 2009.

• Global trade dropped by 25%

International trade focuses on transactions involving movement of goods and services across nations.

International finance focuses on financial or monetary transactions across nations.

Austerity is defined as a set of economic policies a government implements to control public debt

• the FC left many countries with huge budget deficits and low tax income
  
• Several (European) countries used austerity measures as a way to alleviate budget concerns --> risk of default, inability to service debt obligations and higher rate of return for future loans