1. bookVolume 11 (2017): Issue 1 (July 2017)
Journal Details
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First Published
15 Dec 2017
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English
access type Open Access

Monetary policy as a source of risk in international business financings and investments

Published Online: 26 Aug 2017
Page range: 660 - 668
Journal Details
License
Format
Journal
First Published
15 Dec 2017
Publication timeframe
1 time per year
Languages
English
Abstract

This paper aims at explaining the volatility of two main macroeconomic variables (interest rate and exchange rate) that impact the cost of international capital and, consequently, the international financing decision. Firstly, the main economic theories are called to illustrate the relevant determinants of these variables from the perspective of demand and supply of capital sides. The state intervention through monetary policy is introduced to emphasize the alteration of these prices (the price of capital, the price of foreign currencies). The paper is presenting the role of these prices in international financing decision (based on the theoretical model used to estimate cost of international capital), their impact on the foreign direct investment decision and on the international portfolio investment decision. Finally, the paper describe the economic consequences of the monetary public intervention on the financing and investment decision in direct connection with the business cycle theory. The paper associates the monetary policy to the business cycles. The paper comments the unsound solutions proposed against the economic crises and that continued to harm negatively these prices generating the seeds for next international economic recession. The paper is a theoretical one, containing some very interesting research hypothesis and opening the paths for presumable further empirical researches.

Keywords

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