Literature Review: The Definition Of International Trade Internationalization

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Literature Review First of all, we need to figure out the definition of international currency. The concept of international currency originates from vehicle currency. According to Paul Krugman (1979), historically, certain currencies have come to be widely used as vehicle currencies, for instance the pound sterling before 1914 and the U.S dollar in recent years. These currencies used to invoice an international trade transaction, especially when it is not the national currency of neither importer or exporter. To put it another way, these currencies have served as international media of exchange, which are the early international currency. Theoretical discussions of currency internationalization usually begin with the functions of an international…show more content…
As suggested by Bureau of Economic Analysis (BEA) under U.S Department Commerce, International transaction account is divided into the current account and the capital account, based on the different types of cross-border interaction (2014). According to BEA’s research, the international transactions accounts (ITAs) record transactions between U.S and foreign residents over a period of time. The transactions are grouped broadly into (1) transactions related to the production of assets (such as goods and services), the generation of income (such as income earned from holdings of financial and real assets), and transfers (such as gifts), and into (2) transactions in financial assets and liabilities (which include financial transactions in direct investment, in securities, and in claims and liabilities of banks, nonbanks, and government). The first group of transactions is referred to as the current account and the second group as the capital account. The current account can be expressed as the difference between the value of exports of goods and services and the value of imports of goods and services. And the capital account is the net result of public and private international investments flowing in and out of a country. Cross-border settlement has absolutely relationship with internationalization process. Intuitively, much more cross-border settlement using a specific kind of currency will increase the reputation of the currency, and further will increase the acceptance degree of that currency in international currency market. There is a plenty of research on the relationship between cross-border settlement and internationalization. Mundell (1994) points out that the cross-border settlement with one kind of currency is the first step of internationalization of this currency, as doing international business with specific

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