International Financial Management

This document discusses various topics related to International Financial Management. It includes questions on the international monetary system, the trend changes in exchange rates, the adoption of cryptocurrency in Venezuela, the reversal of globalization, and the impact of the trade war between the USA and China. The document also includes a designed spreadsheet.

Running head: INTERNATIONAL FINANCIAL MANAGEMENT
International Financial Management
Student Name:
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INTERNATIONAL FINANCIAL MANAGEMENT
Table of Contents
Part 1: Questions 1 to 4: International Monetary System..........................................................2
1) Using daily close data, please plot the following two exchange rates on the same chart
indicating one specific point on each of these two lines where the trend changes:...................2
2) Stating relevant agreement with the statement:.....................................................................3
3) Stating relevant agreement with the statement:.....................................................................4
4) Indicating who/which country is likely to benefit or suffer from the event:.........................5
Part 2: Designed Spreadsheet.....................................................................................................6
References:.................................................................................................................................7

INTERNATIONAL FINANCIAL MANAGEMENT
Part 1: Questions 1 to 4: International Monetary System
1) Using daily close data, please plot the following two exchange rates on the same chart
indicating one specific point on each of these two lines where the trend changes:
1-Jul-13
14-Oct-13
27-Jan-14
12-May-14
25-Aug-14
8-Dec-14
23-Mar-15
6-Jul-15
19-Oct-15
1-Feb-16
16-May-16
29-Aug-16
12-Dec-16
27-Mar-17
10-Jul-17
23-Oct-17
5-Feb-18
21-May-18
3-Sep-18
17-Dec-18
1-Apr-19
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
Comparison between VEF/USD and BTC/USD
VEF/USD BTC/USD
The above figure directly provides information regarding the currency value of
Venezuelan Bolivar/USD and Bitcoin/USD. The overall information indicates that the
performance of Venezuelan Bolivar against USD has relevantly declined over the period of 6
years. The figure states about the relevant trend change, which occurred twice during the
period of 6 years for both Bolivar/USD and Bitcoin/USD. During 1-July-16, the overall trend
of Bolivar/USD declined from 0.16 to 0.10 values, which stated about the decline in the
currency trend conditions of the currency (Wired.co.uk 2019). On the other hand, during the
same period an uptrend was witnessed in Bitcoin/USD, where the values started to increase
from 1,853.90 to $19,187.
In addition, the second trend for Bitcoin/USD started after the high of 4-May17,
which made the value of per Bitcoin to $19,187. After reaching the high, the overall trend of
the Bitcoin reversed and an immense downtrend started, which lowered the value of the

INTERNATIONAL FINANCIAL MANAGEMENT
cryptocurrency to $3,991.50 during 14-Feb-2019. The analysis has mainly stated that the
increment in demand of Bitcoin relevantly helped in boosting the level of prices of Bitcoin
for the period of less than one year after which the prices declined to lower levels. During the
similar period, the overall value of Venezuelan Bolivar against USD declined further from
0.1 to 0, which made the value of the currency practically nil (Vox.com 2019). The
continuous decline in the currency value is due to the increment in inflation, which was
initiated by the economic crisis in the region. This decline in value of the currency was forced
by the wrong economic decisions and practices that were conducted by the country’s
authorities.
2) Stating relevant agreement with the statement:
The decision regarding whether Venezuela should adopt a cryptocurrency such as
Bitcoin as a national currency, as mainly controversial and needs to be evaluated on an
economics point of view. The current economic condition of Venezuela is heavily critical,
where the inflation rate has increased more than 10,000%, which is forcing the citizens to
face dire consequence, as they are not able to buy basic necessities for survival. The transport
system, banking system and other government amenities have seized to exist in Venezuela
due to the crippling economic conditions that are faced by the country. However, with the
help of cryptocurrency relevant aid is being forwarded to the citizens of the country from
outside the borders (BBC News 2019). However, the small help given from cryptocurrency
would not allow the whole currency to emerge from the current economic crisis, nor will the
adoption of cryptocurrency as their national currency, if no changes are done on the
fundamental level.
The concept of state-backed digital currency could make sense but not in Venezuela,
as the government has been proposing to link its natural resources with the currency values,

INTERNATIONAL FINANCIAL MANAGEMENT
which is already been conducted with their current currency. The use of digital currency is an
innovative step, which has been initiated in Sweden and India, whereas they both were to
replace their existing currency and seize the activities of physical currency transactions.
However, the case of Venezuela is not similar to the conditions of Sweden and India, as an
introduction of new currency is intended, which will initiate the new financial system, while
the underlying currency value would remain same. Thus, it could be understood that the
change in fundamental characteristics of the country’s operations needs to be changed, as
leaping into cryptocurrency would not allow Venezuela to end the ongoing economic crisis
(Heritage.org 2019).
3) Stating relevant agreement with the statement:
The statement is mainly true, as our world is going through the reversal of
globalization in the last few years. The current world economy and the political actions that is
taken by the developed countries mainly indicated about the augmentation of the reversal of
globalization. Globalization is often defined as the free movement of goods, money and
people across borders, which has mainly reduced in the current era, as seen in the political
actions that have been taken by President Donald Trump during his presidency. The actions
have mainly forged the conditions for the reversal of globalization on major scale
(Weforum.org 2019).
One of the specific real-life events that have helped in reversal of globalization is the
trade war between USA and China. The continuous trade war and the imposition of sections
that has been conducted by both the countries on each other is directly increasing the
possibility of globalization reversal, as the free movement of goods, money and people across
borders is being barred (Ft.com 2019). The overall world trade to output has been flat since

INTERNATIONAL FINANCIAL MANAGEMENT
2008, which makes it the longest stagnation that has been recorded since World War 2. The
decline in the current world economy is forcing the augmentation of globalization reversal.
The trade war between USA and China has certain drivers/reasons for the event, as
USA is facing high debt accumulation from China. The increment in the trade deficit between
China and USA has forced the adoption of new sanctions that was imposed on Chinese goods
that is being imported in USA. The sanctions have been imposed to reduce the dependency
on Chinese produced goods in America and boost the relevant growth in American Industry.
The current world economic conditions in deteriorating where focus on country wise supply
is increasing, while the global free trade has been declining (Time.com 2019).
4) Indicating who/which country is likely to benefit or suffer from the event:
The trade war between USA and China will mainly increase suffering for countries all
around the world, as the both the countries are linked with the entire world economy. Both
China and USA has the one of the major economy in the world, where other major world
economies such as the European Union, Russia and the Middle East are directly linked with
China and USA. China is considered to be a major manufacturing hub where majority of the
world productions are conducted, while the machinery equipment’s is imported from
Germany. Thus, it could be understood that a slowdown in China would result in a declining
purchasing power of the Chinese citizens for German machinery. This will have a negative
impact on Germany, which is one of the leading economies in the European Union, which in
turn would slow the growth of the Europe and have negative impact on the overall business
conditions (Prospectmagazine.co.uk 2019). Hence, from the trade war between China and
USA there is collateral damage conducted on different economies of the world.
The benefit of the trade war will be observed by India, Brazil, Taiwan, and Japan, as
the increasing trade barriers between China and USA the demand for product, which could be

INTERNATIONAL FINANCIAL MANAGEMENT
delivered by the developing countries. The growing demand for the soya beans and other
organic materials that was purchased by China from USA could be bought from India, which
will help in increasing the trade relations with the Chinese economy. Furthermore, the
demand of USA for the cheap technology and products could be met by Japan and Taiwan, as
they are considered second in line after China in regards to cheap production.
Part 2: Designed Spreadsheet
Returns
Date Country A Country G Country U Country A Country G Country U
18-Dec 5709.4 10558.96 23327.46 -0.00694 -0.062029 -0.086575
18-Nov 5749.3 11257.24 25538.46 -0.027734 -0.016621 0.0168301
18-Oct 5913.3 11447.51 25115.76 -0.065165 -0.06526 -0.050742
18-Sep 6325.5 12246.73 26458.31 -0.015915 -0.00949 0.0190061
18-Aug 6427.8 12364.06 25964.82 0.0096761 -0.034473 0.021626
18-Jul 6366.2 12805.5 25415.19 0.0121627 0.04059 0.0471246
18-Jun 6289.7 12306 24271.41 0.0271413 -0.023712 -0.005915
18-May 6123.5 12604.89 24415.84 0.008548 -0.000572 0.0104577
18-Apr 6071.6 12612.11 24163.15 0.034538 0.0426049 0.002491
18-Mar 5868.9 12096.73 24103.11 -0.040606 -0.02727 -0.037
18-Feb 6117.3 12435.85 25029.2 -0.004751 -0.057139 -0.042838
18-Jan 6146.5 13189.48 26149.39 -0.003373 0.0210441 0.0578566
17-Dec 6167.3 12917.64 24719.22 0.0181767 -0.008165 0.0184107
17-Nov 6057.2 13023.98 24272.35 0.0135198 -0.01554 0.0382898
17-Oct 5976.4 13229.57 23377.24 0.0402966 0.031235 0.0433897
17-Sep 5744.9 12828.86 22405.09 -0.005427 0.06412 0.0208214
17-Aug 5776.25 12055.84 21948.1 0.0004053 -0.00515 0.0026029
17-Jul 5773.91 12118.25 21891.12 0.0017123 -0.016784 0.025363
17-Jun 5764.04 12325.12 21349.63 0.0004773 -0.022984 0.0162305
17-May 5761.29 12615.06 21008.65 -0.031324 0.0142346 0.003254
17-Apr 5947.59 12438.01 20940.51 0.0074104 0.0101633 0.0134195
17-Mar 5903.84 12312.87 20663.22 0.0247872 0.0404296 -0.00716
17-Feb 5761.04 11834.41 20812.24 0.0151612 0.0259291 0.0477319
17-Jan 5675 11535.31 19864.09 -0.007718 0.0047252 0.0051355
16-Dec 5719.14 11481.06 19762.6 0.0393939 0.0790166 0.0334153
16-Nov 5502.38 10640.3 19123.58 0.018499 -0.002317 0.054081
16-Oct 5402.44 10665.01 18142.42 -0.022209 0.0146503 -0.009052
16-Sep 5525.15 10511.02 18308.15 -0.00077 -0.00771 -0.005039
16-Aug 5529.41 10592.69 18400.88 -0.020296 0.0246859 -0.001701
16-Jul 5643.96 10337.5 18432.24 0.0628126 0.0679136 0.0280117
16-Jun 5310.4 9680.09 17929.99 -0.025221 -0.056773 0.0080277
16-May 5447.8 10262.74 17787.2 0.0247931 0.0222901 0.0007629
16-Apr 5316 10038.97 17773.64 0.0318744 0.0073714 0.005007
16-Mar 5151.79 9965.51 17685.09 0.041199 0.0495092 0.0707529
16-Feb 4947.94 9495.4 16516.5 -0.021489 -0.030895 0.0030487
16-Jan 5056.6 9798.11 16466.3 -0.053879 -0.087955 -0.05502
15-Dec 5344.56 10743.01 17425.03 0.0242172 -0.056159 -0.016642
15-Nov 5218.19 11382.23 17719.92 -0.013306 0.0490399 0.0031919
15-Oct 5288.56 10850.14 17663.54 0.0454592 0.1231517 0.0846709
15-Sep 5058.6 9660.44 16284.7 -0.031306 -0.058387 -0.014722
15-Aug 5222.08 10259.46 16528.03 -0.080893 -0.092805 -0.065678
15-Jul 5681.69 11308.99 17689.86 0.0422824 0.0332591 0.0039927
15-Jun 5451.2 10944.97 17619.51 -0.056061 -0.041077 -0.021719
15-May 5774.95 11413.82 18010.68 0.0002217 -0.003541 0.0095378
15-Apr 5773.67 11454.38 17840.52 -0.015055 -0.04277 0.0036228
15-Mar 5861.92 11966.17 17776.12 -0.006198 0.0495112 -0.019665
15-Feb 5898.48 11401.66 18132.7 0.0624867 0.0661417 0.0563794
15-Jan 5551.58 10694.32 17164.95 0.0302453 0.0906395 -0.036925
14-Dec 5388.6 9805.55 17823.07 0.0170797 -0.017564 -0.00029
14-Nov 5298.11 9980.85 17828.24 -0.037586 0.0701178 0.02517
14-Oct 5505.02 9326.87 17390.52 0.0393184 -0.015561 0.0203968
14-Sep 5296.76 9474.3 17042.9 -0.058282 0.0004361 -0.003249
14-Aug 5624.57 9470.17 17098.45 0.0002579 0.0066638 0.0323094
14-Jul 5623.12 9407.48 16563.3 0.0447954 -0.043281 -0.015648
14-Jun 5382.03 9833.07 16826.6 -0.01676 -0.011083 0.006546
14-May 5473.77 9943.27 16717.17 0.000552 0.0354089 0.0082221
14-Apr 5470.75 9603.23 16580.84 0.0125412 0.0049519 0.0074847
14-Mar 5402.99 9555.91 16457.66 -0.002301 -0.01405 0.0083294
14-Feb 5415.45 9692.08 16321.71 0.0404123 0.0414335 0.0396755
14-Jan 5205.1 9306.48 15698.85 -0.027644 -0.02572 -0.052955

INTERNATIONAL FINANCIAL MANAGEMENT
References:
BBC News. 2019. What's behind Venezuela's political crisis?. [online] Available at:
https://www.bbc.com/news/world-latin-america-36319877 [Accessed 26 Sep. 2019].
Ft.com. 2019. The tide of globalisation is turning | Financial Times. [online] Available at:
https://www.ft.com/content/87bb0eda-7364-11e6-bf48-b372cdb1043a [Accessed 26 Sep.
2019].
Heritage.org. 2019. Venezuela Economy: Population, GDP, Inflation, Business, Trade, FDI,
Corruption. [online] Available at: https://www.heritage.org/index/country/venezuela
[Accessed 26 Sep. 2019].
Prospectmagazine.co.uk. 2019. Will globalisation go into reverse?. [online]
Prospectmagazine.co.uk. Available at: https://www.prospectmagazine.co.uk/magazine/will-
globalisation-go-into-reverse-brexit-donald-trump [Accessed 26 Sep. 2019].
Time.com. 2019. https://time.com. [online] Available at:
https://time.com/39880/globalization-in-reverse/ [Accessed 26 Sep. 2019].
Vox.com. 2019. Want to help people in Venezuela? Your best bet might be bitcoin.. [online]
Available at: https://www.vox.com/future-perfect/2019/7/10/18700235/cryptocurrency-
venezuela-humanitarian-aid-maduro-bitcoin [Accessed 26 Sep. 2019].
Weforum.org. 2019. What if globalisation went into reverse?. [online] Available at:
https://www.weforum.org/agenda/2012/05/what-if-globalisation-went-into-reverse/
[Accessed 26 Sep. 2019].

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Wired.co.uk. 2019. A new cryptocurrency won't solve Venezuela's economic crisis. [online]
Wired.co.uk. Available at: https://www.wired.co.uk/article/venezuela-cryptocurrency-bad-
idea-maduro-petro-bitcoin [Accessed 26 Sep. 2019].