SUBJECTS

This course requires not only understanding of structures and institutions, but also an ability to understand the instruments used in international financial activity in line with the process of globalization. The problem is that the worldview has changed dynamically since 2007 – in terms of global importance and the range of institutions engaged. Additionally we are also seeing wider socio-economic and legal-regulatory limitations imposed on the players – bankers, dealers, asset managers, analysts and others. In a sense, recent events in the financial world have obliged us to realise that we are no longer able to inhabit a secluded, cosy financial world. On completion of this course, you should be in a position to understand the role of global capital and foreign exchange markets within the international financial services system and the appropriate macro-economic relationship.

Introduction to global financial markets
Evaluating perceptions and views of markets, market participants and market instruments and the effect on the global financial market. Contagion, vulnerability and the roots of the financial crisis 2007-2009 and the 2021 Covid crisis. Questioning the ability of self-correction, as well as of the concept of light-touch regulation and the self-regulatory structures. Also the process of globalization will be discussed and the role of multinational corporations.

Is international finance a myth or a reality?
Questioning assumptions (returning to the pre 1980 environment or simply making the pre-2007 environment fireproof), looking at the power of governments, regulators and supranational institutions and studying the role of the banks from a macro-economic perspective. The fundamentals of international finance – trade, money flows, credit and protection; the added on elements – derivatives, trading, complex instruments and also consider “Where next?” – back to basics or diversification and segmentation of the offer or is there some new radical approach?

Measuring & managing risk in international finance
The main risks to markets, systems and economies and how these impact on the markets. Evaluating the concepts of exposure to risk in international financial markets in relation to such areas as shifts in foreign exchange prices and interest rates as well as macro-economic changes. Viewing financial contagion and fears of institutional collapse as well as the linked topic of dysfunctionality between regulatory structures and wider economic policy.

Regulation and international financial markets
The renewed role of regulation sponsored by national and super-national authorities over banks and markets. Unfortunately the monocultural base of that global market ensured the rapid spread of contagion between 2007 and 2009. As a result, we are seeing a determined attempt by regulators to seek to limit the structures of de-regulation and liberalisation of financial services that occurred from the 1980’s. Greater cross-border harmonisation of tax may remove the competitive advantage of some of the more powerful financial centres and begin to dictate a change in the range of facilities available in the marketplace.

The Balance of Payments
This topic is intended to place the role of financial markets clearly within the concepts of macro-economic stabilisation. Defining the balance of payments in conceptual and transactional terms whilst also viewing the role of the current account, the financial account and the capital account within a national economy and within its effdect on the capital markets and overall financial system. Examining trends (e.g. Examples of BoP issues in case study economies) as well as the relationship to GDP and the effect on FX reserves and on the capacity to raise sovereign debt.

International Finance and the new reality
The key issues are that the lessons of the past 30 years indicate that there has been a profound shift in the intrenational financial sectopr accompanied by the effects of globalisation (i.e. the pursuit of cheap goods and its effect on trade balances). This leads us to question whether there is a new reality for international finance? Has the financial crisis implied that there are lessons to be learned or is it simply the Schumperterian Great Correction followed by business as normal? There are undoubtedly many questions, but in reality few answers!

Study Guide will list teaching content, reading and web links

Compulsory and recommended

REQUIRED READINGS (recommended course textbook):
Zvi Bodie , Alex Kane, Alan J. Marcus (2021). Essentials of Investments ISE Paperback – International Edition. McGraw Hill Education.
Maurice Obstfeld, Alan M. Taylor (2005). Global Capital Markets: Integration, Crisis, and Growth. Cambridge University Press.

ADDITIONAL READING:
Mikerević, D., Orsag, S. (2021). Ulaganje u hartije od vrijednosti - I dio, Ekonomski fakultet Banja Luka i Finrar časopis Banja Luka.
Mikerević, D. (2011). Međunarodno finansijsko i valutno tržište. Ekonomski fakultet Banja Luka i Finrar časopis Banja Luka.

CASE STUDIES PROVIDED BY THE PROFESSOR DURING THE LECTURES