Role of banks

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Last updated 10:08 AM on 5/25/26
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4 Terms

1
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What is the international fisher effect (IFE)

  • Countries with higher interest rates tend to see their currencies depreciate over time

2
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What is quantitative easing

An unconventional monetary policy used by a central bank to stimulate the economy when normal interest-rate cuts are no longer effective

3
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Role of central bank in international business

  1. Regulating the market: Setting interest rates

  2. Managing foreign currency reserves: Decides to buy or sell foreing currency

  3. Controlling the supply of money in circulation: May decide to issue or withdraw liquidity in the domestic currency to regulate the amount of money in circulation

4
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What is an FDI

Foreign direct investment

An investment in or the acquisition of foreign assets with the intent to control and manage them

  • Inward FDI: investments coming into the country

  • Outward FDI: investments made by companies from that country into foreign companies in other countries