International Finance for Dummies

Ayse Y. Evrensel, PhD, is an associate professor of Economics at Southern Illinois University. She is a member of the American Economic Association, Western Economic Association, European Union Studies Association, and Committee on the Status of Women in the Economics Profession.

Part I: Getting Started with International Finance 9

Chapter 1: Money Makes the World Go ’Round 11

Chapter 2: Mastering the Basics of International Finance 21

Chapter 3: Buy, Sell, Risk! Users of Foreign Exchange Markets 39

Chapter 4: It’s All about Change: Changes in the Exchange Rate 51

Part II: Determining the Exchange Rate 69

Chapter 5: It’s a Matter of Demand and Supply 71

Chapter 6: Setting Up the Monetary Approach to Balance of Payments 87

Chapter 7: Predicting Changes in Exchange Rates Based on the MBOP 115

Part III: Understanding Long-Term

Concepts and Short-Term Risks 135

Chapter 8: Your Best Guess: The Interest Rate Parity (IRP) 137

Chapter 9: Taking a Bite Out of the Purchasing Power Parity (PPP) 155

Chapter 10: Minimizing the FX Risk: FX Derivatives 167

Part IV: Conducting a Background Check: Changes in Currency through the Years 189

Chapter 11: Macroeconomics of Monetary Systems and the Pre-Bretton Woods Era 191

Chapter 12: The Bretton Woods Era (1944–1973) 211

Chapter 13: Exchange Rate Regimes in the Post–Bretton Woods Era 227

Chapter 14: The Euro: A Study in Common Currency 255

Part V: The Part of Tens 271

Chapter 15: Ten Important Points to Remember about International Finance 273

Chapter 16: Ten Common Myths in International Finance 279

Appendix: Famous Puzzles in International Finance 285

Index 293

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