Globalisation and the Multinational Corporation

Globalisation -- increasing connectivity and integration of countries and corporations and the people within them in term of economic, political, and social activities.

Multinational corporation -- produces and sells good or services in more than one nation.

Securitisation -- repackaging of "pools" of loans or other to create receivables to create a new financial instrument. Pros: banks and companies could hedge against risk. Cons: smart financiers could exploit differences in country-specific regulations and complexity of instruments created opaqueness (not transparant, hard to understand) in the financial system --  lead to financial crisis 2008 - 2010.

Transnational corporations: a parent company in the firm's originating country and operating subsidiaries, branches and affiliates abroad. How they enter the market? Exporting/importing, licensing, franchising, joint venture, greenfield (starting company from scratch).

Important International Players: International banks; international institutions (IMF, the World Bank); multilateral development banks (regional development banks: provide financing and grants); WTO (mediates trade disputes); OECD (Organisation for Economic Cooperation and Development: examines, devised and coordinates policies across 34 countries to foster sustainable economic growth and employment, rising standards of living and financial stability); Bank for International Settlements (BIS) -- fosters international monetary and financial cooperation -- central banks to central bank; European Union (EU), governments, individual investors, institutional investors (superfund, mutual fund, insurance company); sovereign wealth funds (government-run investment pools); hedge funds; private equity funds.

Globalisation and the MNC: Benefactor or Menace? -- global crisis lead to protectionism, slowing trade liberalisation, trade openness and economic risk. Countries who had opened their markets to foreigners subsequently fell into crisis.
Benefits of openness: channels savings to most productive uses, sharing of risk beyond what is possible domestically, domestic recessions can be buffered through borrowing, cost of capital decreases.
Costs of openness: sometimes capital is not used wisely, foreign capital can leave quickly causing financial volatility, difficult in taxing profits -- MNC shift to avoid, capital control effectiveness decreases.

Interbank Market -- Communication System: SWIFT (Society of Worldwide Interbank Financial Telecommunications): links different banks and in different countries; CHIPS (Clearing House Interbank Payments System): clearing house in US for dollars; Fedwire: links computers that deposits within the US Federal Reserve; TARGET (Trans-European Automated Real-time Gross Settlement Express): euro counterpart to Fedwire.
Cross country settlement (or Herstatt) risk: the risk that a financial institutional may not deliver the currency on one side of a completed transaction -- lead to foster netting arrangements.