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World Trade and International Finance

Azerbaijan Republic is an economically progressing state. Trade in the state is based on imports and exports. The state concentrates on the agricultural products in the country, as well as other natural resources like oil and gas. In the past survey, it was seen that oil production is a major source of financial income and has contributed to the state’s fast economic growth. Contributing to the economic growth is also exportation of food products. This economic growth has resulted in a rise of living standards, thus poverty levels have gone down. Job opportunities have increased, also contributing to a rise of the living standards.

Despite the economic growth, the state faced inflation, especially due to high revenue on the non-oil exports. Another contributor to the inflation was the increase in the world oil prices. The inflation is a clear indication that the business sector of the Azerbaijan Republic was not yet stable or well-developed. Other than that, inflation in the Republic of Azerbaijan was also triggered by the increase in salaries and pension given to the people, after the state had experienced economic success.

Research done in the recent past has shown an improvement in the non-oil export sector. This has been financed by the income from the oil exports. Formerly, the state had mainly relied on loans from banks and international organizations which affected the economy, due to the global liquidity crisis. This is because there were very high interest rates and the value of the manat, which is the Azerbaijan currency,  low compared to the US dollar. Recently the value of the manat has increased, hence, a more favorable exchange rate with the US dollar.

To ensure the constant economic growth, the Republic of Azerbaijan should concentrate on other ways of gaining the financial support other than the oil sector. This is due to the fluctuation in the world oil prices, which may affect the economy. The exchange rates should also be increased, and this is made possible by increasing the value of the manat, especially against the US dollar which is widely used.

International trade has its major elements which help in determining how successful it will be. These include selling and buying of commodities between countries, and this entails exports and imports. International trade also involves exchange of services and technology between nations. These can, therefore, be classified into visible and invisible trade, where visible trade involves tangible good, whereas invisible trade involves technology and services, such as hospitality and banking. The transactions carried out in trade ensure that the parties involved are satisfied, such that the one selling or providing the commodity provides it at their own satisfaction and the customer is satisfied with the purchase.

With international trade in mind, the idea of international finance is made clear. For international trade to be successful, economy is an important factor. During trade, the main transactions are based on finances. This is also known as international finance or international macroeconomics. Another term that is used is international monetary economics which deals with financial transactions between the countries. Macroeconomics determines the progress in the trading system of the party involved. For instance, in the Republic of Azerbaijan, the main way of reducing inflation in the state was by establishing a monetary policy that focused on the exchange rates of currencies which would aid in the trading field. International macroeconomics deals with analyzing exchange rates and how the rates affect the trade (Bonneville, 1930).

International trade finance is another element that is required for the successful international business transactions. These transactions require finance in all aspects which include both purchasing and selling of a commodity or, receiving or giving services. Trade finance allows easier planning of the transactions to be made, as well as finances involved, and how to balance the capital used and the profits to be made. This planning will, therefore, aid in reducing risks relate with finances, such as inflation and low profits. Trade finance planning is also a good way of marketing, since purchases are drawn towards an organised plan.

Debits and credits, as used in many financial transactions, are expected to balance. In the case, banking debits are on the banks side whereas credit is on the borrowers’ side. For the two to balance, there ought to be a win-win situation where the bank charges a favorable interest rate, and the borrower of the money is able to get a profit from the borrowed amount. In the Republic of Azerbaijan, the monetary policy prioritizes the low interest rates as a way of getting rid of inflation. This acts as a supplement of low exchange rates which have been made possible by the increase in value of the Azerbaijan manat.

With the borrowing of money from banks, the Republic of Azerbaijan presented an asset to the bank which in other terms could be explained as a debit. In this case, the bank charges an interest for the money lent to the customer. On the other hand, the loan is a credit to the customer which in other terms is a liability. The Republic of Azerbaijan had experienced a period where the value of the manat had risen in relation to the US dollar, thus, making it easier to get loans from banks. This led to a rise in the total amount of credit in the country which contributed to inflation. To control such a situation, the recent research shows that it is advisable to for the central bank to get the support from smaller commercial banks by having an agreeable interest rate.

For a successful international trade system, the elements of concern include the exchange rate in relation to other currencies of higher values. For instance, in the Republic of Azerbaijan, one of the main prospects of economic growth was to increase the value of the Azerbaijan manat in relation to the US dollar. By doing this, the exchange rate would be lower, thus, reduce the rate of inflation. This would help get rid of the domestic inflation, and instead, affect the imports thus a rise in financial progress (Rugman, 2006).

In conclusion, world trade, as seen in the Republic of Azerbaijan, is a complex activity that requires planning and thorough analysis. The main elements of the world trade include financial transactions among provision and purchasing of goods and services, as well as technology. International trade relates directly to international business finance which deals with people and their relation to finances in terms of how they handle them. International business finance involves planning of finances and using the appropriate tools in achieving the plans. These plans are often geared to the visions and goals of the organization involved.

As seen in the Republic of Azerbaijan, the world trade and business finance are related. For successful trade in the state, research has shown that various issues must be addressed. These include focusing on other sources of income for the state apart from oil exports, since there is a constant fluctuation of energy prices. Another step is to increase the value of the Azerbaijan manat in relation to the US dollar, in order to reduce the exchange rates and also to be charged a lower interest rate when it comes to getting loans.  These are all found under the monetary policy whose main objective is to reduce the rate of inflation in the state.

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