What are the other factors that influence the FX market
Course:- Other Subject
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Reference No.:- EM132161306

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1. Trade Policy

Simply put, trade policy refers to the regulations and agreement that control imports and exports to foreign countries. These policies are specific to each country and are formulated by its public officials. Congress plays a major role in U.S trade policy through its legislative authority.

Recently from these articles, the U.S. Trade Representative has officially informed Congress that Trump's administration intends to negotiate trade agreements with Japan, the European Union, and the United Kingdom. The administration plans to address both tariff and non-tariff barriers as well as achieve free, fair, and more balanced trade in the agreement. President Trump's leadership is dedicated to ending these negotiations with a timely and firm result for American workers, farmers, ranchers, and businesses. Why this matters is that the United Kingdom, the EU, and Japan represent the three of the U.S's largest trading partners. New trade agreements between them and the U.S would significantly alter existing trade patterns and change how Canada markets its commodities.

U.S agriculture has been calling for new trade agreements since president Trump pulled out of the Trans-Pacific Partnership in January 2017. Japan is especially important with it being the third largest economy and the fourth largest importer of agricultural goods and ran a $47 billion trade deficit with the world in 2017, including a $12 billion agricultural trade deficit with the U.S. while the EU and the U.S have $1.1 trillion in annual two-way trade.

My question for the class is, given the fact that the biggest obstacle of a trade agreement is the protected status of each country's agricultural businesses, do you think agriculture will be a part of the EU negotiations?

2. Foreign Exchange Markets

The foreign exchange market is the market in which international currency trades take place. Foreign exchange trading takes place in many financial centers, such as commercial banks, corporations, and central banks. This market is also driven by the supply-demand curve. Foreigner's demand for domestic goods and services and correspondence to the debit items on a country's balance of payments are some factors that influence the demand while trading on foreign currency, amount of foreign exchange offered in the market are supply sources. Many factors influence the FX markets. The primary factors are Price Inflation, Interest Rate, and market psychology. Profits could be made through arbitrage, the process of buying a currency cheap and selling it dearly. However, many investors and traders take advantage of this market and try to manipulate the FX market. In recent news, an ex-Citigroup trader and two other former traders, from JP Morgan Chase and Barclays Inc., were accused in the federal court at New York of rigging the foreign-exchange markets. These traders coordinated trades and fixed currency prices in the $5.1 trillion-a-day foreign-exchange market in a group known as "The Cartel." These traders coordinated trades and fixed currency prices in the $5.1 trillion-a-day foreign-exchange market in a group known as "The Cartel." So my questions to the class are-

[1] How can the US government involve in FX market so that these issues are not repeated?

[2] What are the other factors that influence the FX market?

3. Effects of Financial Globalization on Developing Countries

Financial globalization and financial integration are two different concepts in principle. Economic globalization is a general concept that refers to global connections established through cross-linking.

Border financial flows. Economic integration refers to the relationship between a country and the international capital market. These concepts are closely related. For example, on average, the improvement of financial globalization is inevitably accompanied by the development of economic integration. Therefore, the two terms can be used interchangeably in this article.

More relevant to this article is the distinction between legal, financial integration (related to capital account liberalization policies) and actual capital flows. For example, government restrictions on cross-border capital flows are widely used in the literature. On the one hand, using this measure, many countries in Latin America will be considered unaffected by the flow of funds. On the other side, actual cross-border capital flows are large relative to the average capital flows of all developing countries. So, these Latin American countries are quite open to global financial flows.

In contrast, some countries in Africa have few formal restrictions on capital account transactions but have not experienced large capital flows. The analysis in this paper will focus on practical measures of financial integration since it is almost impossible to compare the effectiveness of complex constraints across countries. Finally, the most important thing is the actual level of openness. However, this article will also consider the relationship between legal and factual measures.

Some of the salient features of global capital flows relate to the central theme of this article. First, cross-border capital flows have risen sharply in the past decade. Flows between industrial countries were not only much larger but also surging from industrial to developing countries. Second, the surge in international capital flows to developing countries is the result of both the "pull" factor and the "push" factor. The policy of developing countries opening to the outside world and other changes have produced driving elements. These include liberalization of the capital account and the domestic stock market, as well as a massive privatization programme. Constraining factors include the state of the business cycle in industrial countries and changes in macroeconomic policy. In the longer term, the latter group consists of an increase in the importance of institutional investors in industrial countries and demographic changes (such as the relative aging of the population of industrial countries). The influence of these factors suggests that persistent pressures on global capital have marked the past 20 years flows to developing countries, despite temporary disruptions during times of crisis or downturns in the global business cycle.

My question is: Does Financial Globalization Promote Growth in Developing Countries?

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