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8 views10 pages

seminar report

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shivam bahule
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International Business

Seminar Report
On
Unit 4
Foreign Direct Investment
Introduction

Any investment from an individual or firm that is located in a


foreign country into a country is called Foreign Direct
Investment.
• Generally, FDI is when a foreign entity acquires ownership or
controlling stake in the shares of a company in one country, or
establishes businesses there.
• It is different from foreign portfolio investment where the foreign
entity merely buys equity shares of a company.
• In FDI, the foreign entity has a say in the day-to-day operations of
the company.
• FDI is not just the inflow of money, but also the inflow of
technology, knowledge, skills and expertise/know-how.
• It is a major source of non-debt financial resources for the
economic development of a country.
• FDI generally takes place in an economy which has the prospect of
growth and also a skilled workforce.
• FDI has developed radically as a major form of international
capital transfer since the last many years.
FDI in world economy

Foreign Direct Investment (FDI) refers to the investment made by


an entity (individual or business) from one country into another country.
FDI plays a significant role in the global economy, contributing to
economic growth, job creation, and technology transfer. Here are some
key points about FDI in the world economy:

1. Global FDI Trends:


FDI flows fluctuate from year to year. In 2020, FDI was
significantly affected by the COVID-19 pandemic, with a sharp decline
in global FDI. However, it's important to note that FDI trends can
change over time due to various factors, including economic conditions,
political stability, and regulatory changes.

2. Major FDI Hosts:


Countries like the United States, China, and European nations are
among the top destinations for FDI. These countries offer diverse
markets, infrastructure, and business opportunities.

3. Source Countries:
Major source countries for FDI include the United States,
China, and various European nations. Multinational corporations from
these countries often invest abroad to expand their global footprint.
The Global
Monetary System: An Introduction To
Foreign Exchange Market

The global monetary system is a complex network of institutions,


agreements, and practices that govern the international exchange of
currencies and the flow of money across borders.
Here's some information about the global monetary system:

1. Reserve Currencies:
The U.S. Dollar (USD), the Euro (EUR), the Japanese Yen (JPY),
the British Pound (GBP), and the Swiss Franc (CHF) are among the
major reserve currencies widely held by central banks and used in
international trade and finance.
2. Foreign Exchange Reserves:
Central banks of many countries hold foreign exchange
reserves, primarily in U.S. Dollars, to maintain currency stability,
facilitate trade, and manage balance of payments.
International Monetary Fund (IMF):
The IMF is an international organization that provides
financial assistance and policy advice to member countries facing
balance of payments problems. It plays a role in promoting global
monetary stability.
4. Gold Standard:
In the past, some countries used the gold standard, where the
value of a currency was tied to a specific quantity of gold. This system
has largely been abandoned, with the last major currency (the U.S.
Dollar) decoupled from gold in 1971.
5. Bretton Woods System:
After World War II, the Bretton Woods agreement established
fixed exchange rates with the U.S. Dollar as the primary reserve
currency. It also created the World Bank and the IMF to promote
monetary stability and economic development.
6. Flexible Exchange Rates:
Most countries have transitioned to flexible or floating
exchange rate systems, where market forces determine exchange rates.
However, some still have managed exchange rate regimes with varying
degrees of control.
7. Foreign Exchange Market:
The Forex market is where currencies are traded. It's a
decentralized market where participants buy, sell, exchange, and
speculate on currencies. The market operates electronically 24/5.
8. Exchange Rate Mechanisms:
Various mechanisms influence exchange rates, including interest
rate differentials, economic indicators, political events, and market
sentiment.
Introduction to the Foreign Exchange
Market (Forex or FX):
Definition:
The Foreign Exchange Market, often referred to as Forex or
FX, is the world's largest financial market where currencies are traded. It
serves as a global decentralized marketplace for the exchange, purchase,
and sale of currencies.

1. Market Size:
The Forex market is enormous, with a daily trading volume
exceeding $6 trillion as of my last knowledge update in 2022. This far
surpasses the trading volumes of other financial markets, such as stocks
or commodities.
2. Participants:
The Forex market includes a wide range of participants,
such as central banks, commercial banks, financial institutions,
multinational corporations, governments, investors, and individual
traders.
3. Currency Pairs:
Currencies are traded in pairs, such as EUR/USD
(Euro/US Dollar), GBP/JPY (British Pound/Japanese Yen), or USD/JPY
(US Dollar/Japanese Yen). Each pair represents the exchange rate
between the two currencies.
4. Major, Minor, and Exotic Pairs:
Forex pairs are categorized into major pairs
(e.g., EUR/USD), minor pairs (e.g., EUR/JPY), and exotic pairs (e.g.,
USD/TRY). Major pairs involve the world's most traded currencies and
typically have higher liquidity.
5. Market Hours:
The Forex market operates 24 hours a day, five days a
week, due to its global nature. It opens in Asia, moves to Europe, and
then to North America, with overlapping trading sessions in major
financial centers.
6. Exchange Rate Determination:
Exchange rates are determined by supply
and demand in the Forex market. Various factors, including economic
indicators, geopolitical events, interest rates, and market sentiment,
influence exchange rate movements.
Functions Of Foreign Exchange

Market.
The foreign exchange (Forex or FX) market plays a crucial role
in the global financial system. It serves various functions, including:

1. Facilitating Currency Conversion:


The primary function of the Forex market is to enable the
conversion of one currency into another. This is essential for
international trade, travel, and investment.
2. Price Determination:
Forex markets establish exchange rates, which reflect the relative
values of different currencies. These rates fluctuate based on supply and
demand factors.
3. Hedging:
Participants in the Forex market use it to hedge against currency
risk. Businesses, investors, and financial institutions can protect
themselves from adverse currency movements by using derivatives like
forward contracts.
4. Speculation:
Traders speculate on future currency price movements to make a
profit. They buy and sell currencies based on their expectations of
market developments.
5. Arbitrage:
Arbitrageurs take advantage of price differences for the same
currency pair in different markets. They buy low in one market and sell
high in another, making a profit from the price discrepancy.
6. Supporting International Trade:
Forex provides the liquidity and stability needed for
international trade. Importers and exporters can secure favorable
exchange rates for their transactions.

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