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The Role of Banks in the International Trade in the USA - Assignment Example

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The paper reviews banks within the international trade finance and the United States will be used as a case study. The paper discusses banking data from the US to help in documenting new empirical parts on use of letters of credit as well as similar bank guarantees, both in the US and globally…
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The Role of Banks in the International Trade in the USA
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Download file to see previous pages Despite them providing pre-import and pre-export loans, Banks act as financial intermediaries where they facilitate settlement of the international payments. The volume of the bank trade finance has been shown to vary substantially across various countries. The control for exports is normally hump-shaped within the country credit risk and increase with the time required to import from destination market. Such responses are not uniform, and the trade finance adjusts the least in countries with intermediate risk levels. This creates the need to study the implications of Schmidt-Eisenlohr payment contract choice model to explain observed a response of the bank trade finance to the global macroeconomic factors (Asmundson 2011, p. 13).
Letters of credit have been used consistently reduce the default risk by exporters and importers regarding their obligation in making any delivery or payment. Though such letters are relevant, their use is limited. Also, there has been minimal research on the variance of demand for letters of credit with time. Therefore, this paper will investigate on the use of letters of credit within the international trade as well as establish the new empirical patterns. This will be the first work to investigate trade finance in the United States and use data that changes based on time and destination country (Beck 2010, p. 107).
The current research will provide key statistics regarding trade and finance which is critical in documenting various relationships. Some of the relationships include the changes in bank trade finance volume with increased global risks (Ahn 2011, p. 78). This will involve the use of a volatility index in measuring the expected volatility of the stock market in the United States as well as reflect the risk attitudes both among the investors in the United States and on a global scale.   ...Download file to see next pagesRead More
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