Finance relating to each other in a global context

Economic and financial flows in a globalized worldtext

Transfer pricing

The balance of payments tracks transactions between entities and the rest of the world during a certain period of time.

The current account tracks payments for trade in goods and services, incomes, and transfers of money to and from abroad made by individuals.

The capital account: The capital account records transfers of capital to and from abroad, such as when a company builds a factory in another country.

The financial account tracks inflows and outflows, including direct and portfolio investments, reserve assets, and claims on non-residents.

Foreign direct investments: Foreign investment made by companies, for example plants and offices abroad

International finance

competition: tax haven: creating inequalities ❌

Arm-length principle

Two companies part of the same multinational group trade with each other

Illegal ❌

Two unrelated companies trade with each other: genuine negotiation: dealing with transfer mispricing. : ✅

The foreign exchange market

Demand for pounds from abroad

The more price elastic the demand for a product, the more price the demand for pounds

Supply of pounds to the foreign currency market

The value of pounds increases means more purchasing power

Reaching equilibrium in the currency market

Free market: Quantity supplied equals the quantity demanded :

The McBurger index

Helpful to identity value, to see if a currency is over or undervalued.

The euro

Official currency of sixteen countries in the EU.

Impact the competitiveness of a business

Government intervention in the foreign currency markets

Stabilize the value of its currency and fix its value. “fixed or pegged exchange rate. It is buying and selling currency using the interest rate.

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