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Global Economy and Payment Ecosystems

Course developer

Course abstract

The study course provides basic knowledge of global economic processes and payment systems. The development of the financial sector initiates new financial intermediaries that offer financial assets of various maturities and forms of payment. The study course creates understanding and detailed knowledge of the development of finance and payment ecosystem, their theoretical and practical aspects, financial assets, European and cross-border payments as well as the use of financial instruments and settlement methods. The study course provides knowledge of international trade rules Incoterms as well as special types of trade financing and settlements. Its aim is to provide knowledge of the functioning of the global economy and the use of financial instruments in global payments.

Learning outcomes and their assessment

Students will be able to demonstrate:
Knowledge of
• foreign trade policy and the importance of globalization today, the causes of global and regional financial crises, theories of international economics – test, discussions in class, independent work, exam;
• principles and types of the international currency system and policy – independent work;
• principles of the functioning of the currency market and factors affecting exchange rates – discussions in class;
• classification of currencies, foreign exchange market operation, derivatives market and exchange rate calculations – test with calculations;
• information sources, terms (Incoterms), forms of payment and methods of financing used in international trade – test.
Professional skills to
• understand economic trends and political decisions made at the international and global level, be able to predict their consequences and make decisions at the level of companies as well as organizations and institutions, taking into account the risks posed by the context of globalization and international developments – independent work, exam;
• be able to apply international economic theories, foreign trade policy instruments and the most important macroeconomic regularities of an open economy and engage in a joint discussion of current international economic relations issues – test, discussions in class, exam;
• be able to calculate exchange rate in the spot and future OTC market, analyse the results obtained, understand the causes and draw conclusions – test with calculations, exam, calculations in class;
• understand international trade rules (Incoterms) and the scheme for concluding future contracts as well as types of documentation for special trade financing instruments – test, exam, discussions in class.
Soft skills to:
• be able to independently solve various tasks, collaborate in a group with colleagues to obtain the necessary information and develop a work on the chosen topic, which includes practical aspects of the topic, conclusions and proposals – independent work, group work, discussions in class;
• be able to present and explain the chosen topic to the audience as well as create a presentation on currencies – group work, presentations;
• be able to plan tasks responsibly – independent work.
Competences to:
• be able to understand problems in the field of global economics at the level of companies as well as organizations and institutions and make responsible decisions in an export/import company – discussions in class;
• be able to practically apply the acquired theoretical knowledge and practical skills on the theoretical and practical aspects of payment ecosystems, sources of information and rules of international trade as well as the use of payment methods and financing types in settlements – independent work, group work, tests, presentations, exam.

Course Content(Calendar)

Full-time studies:
1. International and global economy and international trade, international division of labour. Economic growth and goods/services with high value added. Closed and open economies. Globalization and crises (lectures – 4 h, practical work – 2 h)
2. Theories and indicators of the global economy (global GDP, trust or confidence indices). Mercantilism. Theory of absolute advantage. Theory of comparative advantage. Helscher-Ohlin theory (lectures – 3 h, practical work – 2 h)
3. Balas – Samuelson theory. Internationally tradable and non-tradable goods and services (lectures – 2 h, practical work – 2 h)
4. Free trade policy and protectionist policy, its instruments. Trade regimes. The EU common foreign trade policy (lectures – 3 h, practical work – 2 h)
Test 1 – global economic theories, free trade policy, trade regimes – 1 h
5. Payment ecosystems: traditional and electronic payment systems. Payment processing, merchants and customers. The international currency system and its development (lectures – 2 h)
6. Foreign exchange market, its structure and participants. The role of the banking system in the foreign exchange market. The mechanism of operation of the international foreign exchange market (FOREX) and trading platforms. Cryptocurrencies and central bank digital currencies (lectures – 6 h, practical work – 2 h)
7. Types of currencies as a generally accepted means of payment, currency quotation and convertibility. Currency orders. Hedging. Exchange rates and factors influencing exchange rates (lectures – 3 h, practical work – 3 h)
8. Financial derivative instruments (derivatives) and their application in global markets (lectures – 3 h, practical work – 1 h)
Test 2 – theoretical and practical aspects of the currencies and financial derivative instruments market – 1 h
9. International bank settlements and financing in global trade, types and methods of payments. Bank guarantees, collection transactions, letters of credit, factoring, forfeiting, payment cards (debit cards, credit cards), checks. Digital wallets or e-wallets (Google Pay, Apple Pay, Xiaomi Pay, Smartwatch Pay, etc.) (lectures – 4 h, practical work – 2 h)
10. Investment, crowdfunding and peer-to-peer lending platforms. Insurance policy trading in a digital environment (lectures – 3 h, practical work – 2 h)
11. International trade information sources and documents. International trade agreements, international cargo insurance. International commodity and stock exchanges. International trade rules (Incoterms 2020) (lectures – 5 h, practical work – 1 h)
Test 3 – international trade information sources, Incoterms, payment methods and financing methods – 1 h
12. Presentation of independent work – 4 h

Part-time studies:
All topics specified for full-time attendance are implemented, yet the number of contact hours is 1/2 of the specified number of hours for full-time studies.

Requirements for awarding credit points

1. Global economic theories, free trade policy, trade regimes - test (10%)
2. Theoretical and practical aspects of the foreign exchange and derivatives market - test with calculations (10%).
3. International trade information sources, Incoterms, types of payments and financing methods - test (10%)
4. Currencies, diversity of currencies, design and value - independent work, group work, presentation (5%)
5. Research on the selected study course topic, which includes practical aspects of the topic, conclusions and proposals. Defence of the research work in the form of a presentation - independent work or group work, presentation (20%)
6. Activity in classes (5%)
Written exam - all topics (40%).

Description of the organization and tasks of students’ independent work

1) getting ready for practical assignments, tests and exams by studying both lecture materials and sources indicated in the list of literature;
2) selection of a single currency of one or more countries (or another criterion, in agreement with the teacher) and development of a presentation on the formation, design and value of the currency (7 min presentation during the specified class time and submission in e-studies);
3) a freely chosen topic from the study course themes, which is researched in detail (criteria indicated in e-studies) and presented (10 min) during the class time indicated by the teacher.

Criteria for Evaluating Learning Outcomes

The grade of the course exam depends on the assessment of the exam task and the cumulative assessment of the course tests and independent works, 10% corresponds to one point on the 10-point assessment scale.
A student can obtain a successful mark for the test or exam test if at least 40% of the test tasks are completed correctly. Presentations are assessed according to the established criteria. Rewriting of tests and re-defending of presented tasks is not provided.

Compulsory reading

1. Incoterms 2020. [tiešsaiste]. The International Chamber of Commerce (ICC). ICC Publication 2020 Edition. Pieejams: https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/.
2. Rupeika-Apoga R. Tirdzniecība ar valūtu kā uzņēmējdarbības veids. Rīga, 2006, 335 lpp.
3. Oļevskis G. Starptautiskā ekonomika. Rīga: Jāņa Rozes apgāds, 2004, 192 lpp.
4. Praude V. Finanšu instrumenti. I: ieguldījumi, darījumi, analīze. Rīga: Burtene, 2009, 446 lpp.
5. Sang Man Kim. Payment Methods and Finance for International Trade. 1st edition: Kindle Edition, 2020, p. 303.
6. Copeland L. Exchange Rates and International Finance. 6th edition. Great Britain: Prentice Hall, 2014, p. 519.
7. Rubanovskis A. Starptautiskā ekonomika: Valūtas tirgus. Rīga: EKA, 2004, 146 lpp.

Further reading

1. Stiglics D. Globalizācija un neapmierinātība ar to. Rīga: BA Turība, 2010, 248 lpp.
2. Bhogal T. International Trade Finance: a Pragmatic Approach. Switzerland: Palgrave Macmillan, 2019.354 p.
3. Brigham E.F., Gapenski L.G. Financial Management: Theory and Practice. Chicago: Dryden Press, 2007.1071 p.
4. Cheol S. U., Resnick B.G. International Finance. 7th global edition. McGrawHill education, 2014.608 p.
5. Grath A. The Handbook of International Trade and Finance: the Complete Guide to Risk Management, International Payments and Currency Management, Bonds and Guarantees, Credit Insurance and Trade. 2nd edition, Kogan page, 2012, 222 p.
6. Gutkins A., Jadčenko L. Iespēju līgumu teorija un prakse. Rīga, 2003. 127 lpp.
7. Henderson C. Currency Strategy: the Practitioner's Guide to Currency Investing, Hedging and Forecasting. Chichester: John Wiley & Sons, 2006.243 p.
8. Madura J. International Financial Management. Andover: Cengage Learning EMEA, 2014. 671 p.
9. Rupeika-Apoga R. Valūtas tirgus un valūtas darījumi, Rīga; Datorzinību centrs, 2003, 159 lpp.
10. Saļņikovs I. Starptautiskais valūtas tirgus FOREX: Valūtas dīlinga pamati. Rīga, 2000. 135 lpp.
11. Vaidere I. Starptautiskās valūtas attiecības. Rīga: LU Akadēmiskais apgāds, 2015. 141 lpp. Pieejams elektroniski: https://www.inese-vaidere.lv/wp-content/uploads/2017/04/Starpatutiskas_Valutas_attiecibas-I-Vaidere.pdf
12. Zīle H. Latvijas ārējie ekonomiskie sakari. Rīga: Biznesa augstskola Turība, 2003, 365 lpp.
13. Oļevskis G. Starptautiskā tirdzniecība. Rīga: RISEBA, 2003, 204 lpp.
14. Thies C.F. Global Economics: A Holistic Approach. Lexington Books, 2018, p. 241.
15. Salvatore D. International Economics. 9-th edition, 2007, 838 p.
16. Guaņjao L. No trešās pasaules valsts uz pirmo. Singapūras stāsts: 1965-2000. Rīga: BA Turība: 2013, 653 lpp.
17. Reinerts S. Ē. Kā bagātās valstis kļuva bagātas un kāpēc nabadzīgās valstis paliek nabadzīgas. Rīga: Zvaigzne ABC, 2012, 392 lpp.
18. Čangs H. Sliktie samarieši. Rīga: Zvaigzne ABC, 2011, 284 lpp.
19. Krūgmens P. Depresīvās ekonomikas atgriešanās un 2008.gada krīze. Rīga: Jumava: 2010, 216 lpp.

Periodicals and other sources

1. Business Week: nedēļas izdevums. Business Week [tiešsaiste]. Bloomberg L.P. Businessweek ISSN 0007-7135. Pieejams: https://www.bloomberg.com/businessweek.
2. Dienas Bizness: nedēļas laikraksts: Latvijas biznesa avīze. Rīga: Diena: Dagens Industri, 2005.
3. Financial Times: laikraksts. Financial Times [tiešsaiste]. England based finance newspaper. London: The Financial Times Ltd. Pieejams: http://www.ft.com/home/europe.
4. Forbes: žurnāls. Rīga: SK Media, 2010. ISSN 1691-6018.
5. Bank for International Settlement: Foreign Exchange and Derivatives Reports: Annual Reports [tiešsaiste]. Pieejams http://www.bis.org. 6.Komercbanku mājaslapas.

Notes

Restricted elective study course for the academic Bachelor study programme “Economics”