Essays on International business

1-Describe Adam Smith’s concept of absolute advantage and David Ricardo’s concept of Comparative Advantages. Are those concepts still useful in the 21st century’s Business environment? The concept of absolute advantage is the ability of a country to use less resources (inputs) to produce goods/products than any other country. For Smith, a country should specialize in…

Interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries. [1] The fact that this condition does not always hold allows for potential opportunities to earn riskless profits from covered interest arbitrage. Two assumptions central to interest rate parity are capital mobility and perfect substitutability of domestic and foreign assets. Given foreign exchange market equilibrium,…

The transaction exposure component of the foreign exchange rates is also referred to as a short-term economic exposure. This relates to the risk attached to specific contracts in which the company has already entered that result in foreign exchange exposures. A company may have a transaction exposure if it is either on the buy side…

Viva NAFTA? – pros and cons of NAFTA – Cover Story National Review,  Oct 18, 1993  by Tom Bethell Is NAFTA a free-trade accord? Or have President Clinton’s side agreements turned it into a document locking us into an international regulatory behemoth? THE FIRST thing to say about the North American Free Trade Agreement is…

What role does the WTO play in international business? In this increasingly globalized scenario, companies need to be globally competitive in order to survive. Knowledge and understanding of different countries’ economies and their market is a must for establishing oneself as a global player. Now the business has gone beyond the boundaries of a nation…