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DAF1205: Foreign Exchange and International Trade Notes

Institution: Mount Kenya University

Course: Diploma in Banking

Content Category: Lecture Notes

Posted By: PENTAMRK

Document Type: PDF

Number of Pages: 93

Price: KES 300
 
    

Views: 914     Downloads: 9

Summary

Contents
COURSE DESCRIPTION ................................................................................................................................... ii
CHAPTER ONE: INTERNATIONAL TRADE ..................................................................................................1
1.1 Reasons for the development of international trade ...................................................................................1
1.3 Theory of comparative advantage ..............................................................................................................2
1.3.1Limitations of Comparative advantage.................................................................................................4
1.4 Gains from international trade ....................................................................................................................4
1.5 chapter review questions.............................................................................................................................6
CHAPTER TWO: INTERNATIONAL TRADING ENVIRONMENT ..............................................................8
2.1 Trade Strategies..........................................................................................................................................8
2.3 Trade barriers..............................................................................................................................................9
2.3.1 Arguments for free trade......................................................................................................................9
2.3.2 Protectionism.....................................................................................................................................10
2.4 Commodity agreements............................................................................................................................16
2.5 Cartels.......................................................................................................................................................18
2.6 Trade blocs ...............................................................................................................................................18
2.6.1 Forms of integration ..........................................................................................................................19
2.7 Chapter review questions..........................................................................................................................21
CHAPTER THREE: SERVICES PROVIDED BY BANKS TO FACILITATE INTERNATIONAL TRADE23
3.0 Introduction ..............................................................................................................................................23
3.1 Import trade finance..................................................................................................................................24
3.1.1 Introduction - Importing ....................................................................................................................24
3.1.2 Settlement of Import Trade Transactions ..........................................................................................25
3.1.3 Common terms of purchase ...............................................................................................................25
Role of Banks in Documentary Collections................................................................................................28
Variations of Documentary Collections .....................................................................................................28
Flow of Transaction in a Documentary Collections Deal..........................................................................29
Advantages and disadvantages of Documentary Collection ......................................................................30
Risks in Documentary Collections .............................................................................................................30
When to use Documentary Collections?.....................................................................................................31
Role of Banks in Documentary Letters of Credit........................................................................................32
v
Types of Letters of Credit ...........................................................................................................................32
Methods of Settlement.................................................................................................................................33
Financing Importers through Letters of Credit ..........................................................................................33
Special Note on Documentary Letters of Credit.........................................................................................34
3.2 Chapter review questions..........................................................................................................................37


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