International Financial Management: Crisis and Challenges

About International Financial Management: Crisis and Challenges

The question is whether an individual country that has mismanaged its affairs will precipitate an international financial crisis. Two myths have propagated the view that the question has an affirmative answer. One myth is that the individual country’s loss of creditworthiness has a tequila effect. The supposed tequila effect is that other countries without the problems of the troubled country are unfairly tarnished as also subject to those problems. In this way, it is said, contagion spreads the crisis from its initial source to other innocent victims. The second myth is that a bailout of the troubled country is essential. The rationale is again the idea of contagion. Failure to organize a bailout will create an international financial crisis by a domino effect. Rescuing the troubled country saves the rest of the world from unwarranted financial collapse. In today’s world of highly mobile capital and deep capital markets, a pegged exchange rate signifying a low inflation policy attracts large capital inflows from abroad. The book provides the students current information on the different areas of this subject. The publication is useful not only to the students but also to the research scholars and academic professionals.