Supply and demand for money in global markets

The loanable funds market in any country is linked to the global market through net exports. If net exports in a country are negative, meaning that the value of imports is greater than the country’s exports, then all countries in the world provide this country with funds, and the amount of loanable funds is greater than the national savings of this country, and the opposite is true in the case of net exports being positive, as the value of exports is greater. From the value of the country's imports, the amount of loanable funds is less than the country's national savings, and the state considers this country a supplier of funds, and from here the idea of loanable funds in global markets is summarized.

The global loanable funds market is known as the market in which funds are exchanged on an international level. It is considered like the capital markets in countries, but the difference is that dealing is done on a global level and not a local one specific to countries. Demand and supply in this market are determined based on the real interest rate for the global equilibrium, where This price achieves a balance between supply and demand for funds such that the funds offered are equal to the funds required, but this equilibrium price does not make the funds required and offered at the level of the national economy equal. It determines the demand for funds and their supply in the national economy if the country is a lender or borrower from the rest of the countries of the world.

The supply of borrowable funds is considered specific and fixed, like the supply of funds in the national economy. We find that the central bank determines the supplied quantity of funds, so the supply curve of funds is considered fixed and does not change, while demand changes and is not fixed. When interest rates are low, the demand for funds increases, and in the event that If the real interest rate is high, the demand for money decreases. In both cases, the real interest rate changes until equilibrium is achieved so that the supplied quantity of money is equal to the quantity demanded.

Currently, all countries of the world are affected by each other. The real interest rates in a particular country’s national economy are affected by interest rates in the global market. If the real interest rate in a country is greater than the global equilibrium interest rate, which leads to the flow of funds to this country to earn the difference in interest rates, then the supply of money increases and the interest rate decreases until a balance is achieved between the supply and the required quantity of funds and the real interest rate in the global market is close to the prices Interest in the national economy and sometimes the rise in inflation rates and exchange rate fluctuations make the difference in interest rates between global and national interest rates close and no transfer of funds occurs.