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 Contents

List of illustrations xiii

About the author xix
Preface xxi

PART I
INTERNATIONAL FINANCIAL MARKETS AND ENVIRONMENT 1

1 THE WORLD OF INTERNATIONAL FINANCE 3

Unique dimensions of international finance 3
The benefits of studying international finance 3
The growing importance of international finance 4
Topics covered in this book 17
Summary 22
Review questions 22
Assignment problems 22
Bibliography 23
Parallel material for case courses 23
Appendix A 24
Appendix B 28

SECTION I
THE MARKETS FOR FOREIGN EXCHANGE 33

2 AN INTRODUCTION TO EXCHANGE RATES 35

The foreign banknote market 35
The spot foreign exchange market 38
Direct versus indirect exchange and cross exchange rates 48
Summary 55
Review questions 55
Assignment problems 56
Bibliography 57

3 FORWARD EXCHANGE 58
What is forward foreign exchange? 58
Forward exchange premiums and discounts 59
Forward rates versus expected future spot rates 61
Payoff profiles on forward exchange 61
Outright forward exchange and swaps 63
The flexibility of forward exchange 65

vii
CONTENTS

Forward quotations 67
Summary 72
Review questions 72
Assignment problems 73
Bibliography 73

4 CURRENCY FUTURES AND OPTIONS MARKETS 74

Currency futures 74
Currency options 81
Forwards, futures, and options compared: a summary 89
Summary 92
Review questions 92
Assignment problems 93
Bibliography 94
Appendix A 94

SECTION II
THE FUNDAMENTAL INTERNATIONAL PARITY CONDITIONS 99

5 THE PURCHASING-POWER PARITY PRINCIPLE 101

The law of one price 101
Absolute (or static) form of the PPP condition 102
The relative (or dynamic) form of PPP 103
Efficient markets (or speculative) form of PPP 104
The empirical evidence on PPP 106
Reasons for departures from PPP 106
Statistical problems of evaluating PPP 107
The practical importance of PPP 109
Summary 110
Review questions 110
Assignment problems 110
Bibliography 111

6 INTEREST PARITY 113

The investment and borrowing criteria 114
The covered interest parity condition 120
Combining PPP and interest parity 124
Why covered interest differences persist 126
Summary 139
Review questions 140
Assignment problems 140
Bibliography 141

SECTION III
THE DETERMINATION OF EXCHANGE RATES 143

7 THE BALANCE OF PAYMENTS 145

Influences on currency supply and demand 145
Principles of balance-of-payments accounting 146
Balance-of-payments entries and the factors that influence them 147
Implications of the balance-of-payments accounting identity 155
The net international investment position 159
Objectives of economic policy 160

viii
 CONTENTS

Summary 163
Review questions 164
Assignment problems 164
Bibliography 165

8 SUPPLY-AND-DEMAND VIEW OF EXCHANGE RATES 166

Imports, exports, and exchange rates 167
The factors affecting exchange rates 168
The stability of exchange rates 177
Short-run versus long-run trade elasticities and the J curve 180
Summary 183
Review questions 183
Assignment problems 184
Bibliography 184
Appendix A 184

9 ASSET-BASED THEORIES OF EXCHANGE RATES 187

Stock versus flow theories of exchange rates 187
The monetary theory of exchange rates 187
The asset approach to exchange rates 192
The portfolio-balance approach to exchange rates 193
Theories of exchange-rate volatility 197
Summary 202
Review questions 202
Assignment problems 203
Bibliography 203

SECTION IV
FIXED (PEGGED) AND FLEXIBLE EXCHANGE RATES 205

10 ALTERNATIVE SYSTEMS OF EXCHANGE RATES 207

The classical gold standard system 207
The Bretton Woods and dollar standards 212
The European Monetary System (EMS) 216
Hybrid systems of exchange rates 219
Target zones 222
Summary 225
Review questions 226
Assignment problems 226
Bibliography 227
Appendix A 227
Appendix B 231

11 THE INTERNATIONAL FINANCIAL SYSTEM: PAST, PRESENT, AND FUTURE 233

The past 233
The present 248
The future 248
Degree of exchange-rate flexibility: fixed versus flexible exchange rates 252
Summary 261
Review questions 262
Assignment problems 262
Bibliography 263

ix
CONTENTS

12 MACROECONOMIC DIMENSIONS OF INTERNATIONAL FINANCE 265

Policy effectiveness 265
Policy conflicts 273
Summary 276
Review questions 276
Assignment problems 277
Bibliography 277
Appendix A 277

PART II
INTERNATIONAL FINANCIAL MANAGEMENT 281

SECTION V
FOREIGN EXCHANGE RISK AND EXPOSURE 283

13 MANAGING FOREIGN EXCHANGE EXPOSURE AND RISK 285

The importance of understanding risk and exposure and measuring them 285
The nature of exchange-rate risk and exposure 285
Examples of foreign exchange exposure 287
Exposure as a regression slope 293
Definition of foreign exchange risk 298
Exposure, risk, and the parity relationships 299
Summary 306
Review questions 307
Assignment problems 307
Bibliography 308

14 OPERATING EXPOSURE 310

Operations affected by exchange rates 310
The exporter 311
The importer 320
Summary of effects of exchange rates on exporters and importers 323
Effect of currency of invoicing and forward hedging 324
Measuring exposure: an alternative approach 329
Summary 331
Review questions 332
Assignment problems 332
Bibliography 333

SECTION VI
HEDGING AND SPECULATION 335

15 HEDGING RISK AND EXPOSURE 337

Whether to hedge: managerial hedging versus shareholder hedging 337
Hedging of receivables and payables 338
The cost of forward hedging 341
The benefit of forward hedging 344
Financial engineering: payoff profiles of different hedging techniques 352
Having a company hedging policy 356
Summary 357
Review questions 357
Assignment problems 358
Bibliography 359

x
 CONTENTS

16 EXCHANGE-RATE FORECASTING AND SPECULATION 360

Speculation 360
Market efficiency 363
Exchange-rate forecasting 367
Summary 380
Review questions 381
Assignment problems 381
Bibliography 382

SECTION VII
INTERNATIONAL INVESTMENT AND FINANCING 385

17 CASH MANAGEMENT 387

The objectives of cash management 387
Investment and borrowing choices with transaction costs 388
International dimensions of cash management 390
Summary 399
Review questions 399
Assignment problems 399
Bibliography 401

18 PORTFOLIO INVESTMENT 402

The benefits of international portfolio investment 402
International capital asset pricing 412
Bonds and international portfolio diversification 419
Settlements of international portfolio investments 421
Summary 423
Review questions 423
Assignment problems 424
Bibliography 424

19 INTERNATIONAL DIMENSIONS OF CAPITAL BUDGETING 426

Selecting projects 426
Difficulties in evaluating foreign projects 428
Cash flows: home versus foreign perspectives 429
Discount rates: corporate versus shareholder perspectives 431
The adjusted present value technique 431
Selecting the appropriate discount rates 434
An example 436
Actual practice of capital budgeting 440
Summary 441
Review questions 441
Assignment problems 442
Bibliography 443
Appendix A 443
Appendix B 448

20 THE GROWTH OF AND CONCERNS ABOUT MULTINATIONALS 452

The growth of multinational corporations 452
Special issues facing multinational corporations: transfer pricing 461
Special issues facing multinational corporations: country risk 463
Problems and benefits from the growth of multinational corporations 468
Transnational alliances 470

xi
CONTENTS

Summary 472
Review questions 473
Assignment problems 473
Bibliography 474

21 INTERNATIONAL DIMENSIONS OF LONG-TERM FINANCING 475

Equity financing 475
Bond financing 480
Bank financing, direct loans, and the like 487
Government and development-bank lending 490
Other factors affecting the financing of subsidiaries 491
Financial structure 492
Summary 495
Review questions 496
Assignment problems 496
Bibliography 497

SECTION VIII
INSTITUTIONAL STRUCTURE OF INTERNATIONAL TRADE AND FINANCE 499

22 MULTINATIONAL BANKING 501

The Eurodollar and offshore currency markets 501
Multinational banking 509
Summary 518
Review questions 518
Assignment problems 519
Bibliography 520

23 INSTRUMENTS AND INSTITUTIONS OF INTERNATIONAL TRADE 521

Extra dimensions of international trade 521
International trade involving letters of credit: overview of a typical transaction 521
Alternative payment and guaranteeing procedures 526
The financing of international trade 528
Countertrade 532
The institutions regulating international trade 534
Summary 538
Review questions 539
Assignment problems 539
Bibliography 539

Glossary 541
index 567

xii
 Illustrations

FIGURES
1.1 International investment position of the United States 14
1B.1 The gain from the better allocation of capital 29
IB.2 Utility from different consumption patterns 30
2.1 Organization of the foreign exchange market 40
2.2 Selected exchange rates by region 47
2.3 Direct versus indirect exchange: zero transaction costs 49
2.4 Direct versus indirect exchange: nonzero transaction costs 52
3.1 Payoff profile on forward contract to buy €1 m illion 63
3.2 Payoff profile on forward contract to sell €1 m illion 64
4.1 Payoff profile for purchase of euro futures contract 80
4.2 Payoff profiles of buyer and writer of euro call option for €125,000 89
4.3 Payoff profiles of buyer and writer of euro put option for €125,000 90
4A.1 Equivalence of buying foreign currency European call and selling put
versus buying the foreign currency forward 95
4A.2 Equivalence of selling foreign currency European call and buying put
versus selling the foreign currency forward 96
6.1 Dollar versus hedged pound investments 115
6.2 Dollar versus hedged pound borrowing 118
6.3 Covered interest arbitrage: dollar borrowing and pound investing 119
6.4 The covered interest parity diagram 123
6.5 The interdependence of exchange rates, interest rates, and inflation rates 126
6.6 One-way and round-trip interest arbitrage 128
6.7 Interest parity in the presence of transaction costs, political risk, or
liquidity premiums 130
6.8 A more roundabout one-way arbitrage 133
8.1 Deriving the supply of pounds 168
8.2 Deriving the demand for pounds 169
8.3 The exchange rate from imports and exports 170
8.4 Deriving the demand for imports 171
8.5 Deriving the export supply curve 171
8.6 Inflation in relation to supply and demand 173
8.7 Inflation and exchange rates 174
8.8 Currency supply and import elasticity 178
8.9 Stability of foreign exchange markets 179
8.10 The J curve 181
9.1 The portfolio-balance theory: effect of open-market operations 194
9.2 Real income growth and the portfolio-balance theory 196

xiii
ILLUSTRATIONS

9.3 Exchange-rate overshooting 198

10.1 The workings of the gold-exchange and dollar standards 213
10.2 The price-level adjustment mechanism of the gold-exchange and
dollar standards 215
10.3 Crawling peg 220
10.4 Target zones for exchange rates 223
11.1 US bilateral trade balance with China, 1985–2006 251
11.2 Stabilizing and destabilizing currency speculation 257
12.1 Goods, money, and external equilibrium 267
12.2 Policy effectiveness with fixed exchange rates 270
12.3 Policy effectiveness with flexible rates 272
12.4 Policy recommendations and policy conflicts when the IS and LM
curves intersect in different regions 274
12A.1 Assignment problem 279
13.1 Exposure as the slope of a regression line 295
14.1 Exporter and devaluation in a competitive market 313
14.2 Exporter and devaluation in a competitive market: effect of cost increases 315
14.3 Devaluation and the demand curve 316
14.4 Exporter and devaluation in an imperfectly competitive market 317
14.5 Exporter and devaluation in an imperfectly competitive market:
foreign currency units 320
14.6 The importer and a devaluation 321
14.7 Importer and devaluation in foreign currency units 323
14.8 Importer of inputs and devaluation 324
14.9 Exporter with payables exposure: dollar accounting 326
14.10 The J curve 327
15.1 Payoff profiles, payables exposure, and resulting exposure with forward
and futures contracts 353
15.2 Payoff profiles from option hedges 355
17.1 Example of Navistar International’s foreign exchange netting system 396
17.2 Digital Equipment’s weekly cash cycle 398
18.1 Correlations between US and other countries’ stock markets,
US dollars, 1980–1990 403
18.2 Correlations between Japanese and other countries’ stock markets,
Japanese yen, 1980–90 404
18.3 Correlations between British and other countries’ stock markets,
British pounds, 1980–1990 405
18.4 The size of the gain from international diversification 407
18.5 Local-market versus exchange-rate components of volatility of
US dollar values of non-US stocks, 1970s and 1980s 409
18.6 The advantages of international diversification with and without
exchange risk 411
18.7 The relationship between expected return and total risk 414
18.8 Efficiency frontier of global stocks, US dollars, 1980–1990 415
18.9 Contribution of bonds to the globally efficient frontier,
US dollars, 1980–1990 421
20.1 Euromoney’s country-risk rating scheme 465
21.1 Parallel loans and credit swaps 490
23.1 Application and agreement for documentary letter of credit 522
23.2 The draft and banker’s acceptance 524
23.3 The steps in international trade 525
23.4 The steps involved in forfaiting 530
23.5 The different forms of countertrade 533

xiv
 ILLUSTRATIONS

TABLES

1.1 Aggregate international trade versus GDP 5

1.2 International trade of newly industrialized Asian economies 6
1.3 Selected foreign exchange gains, 2001 9
1.4 Selected foreign exchange losses, 2001 10
1.5 The volatility of exchange rates 15
1A.1 The situation with no international trade 24
1A.2 Input/output under free trade 26
2.1 Exchange rates on foreign banknotes (Traveler’s dollar – August 15, 2007) 36
2.2 Geographical distribution of average daily foreign exchange turnover,
April 2007 39
3.1 Foreign exchange net turnover by market segment: daily averages,
April 2007 59
3.2 Per annum percentage premium (+) or discount (–) on forward foreign
exchange vis-à-vis the US dollar 60
3.3 Unanticipated changes in the spot exchange rate and gains or losses on
forward purchase of €1 m illion at $1.35/€ 62
3.4 Unanticipated changes in the spot exchange rate and gains or losses on
forward sale of €1 m illion at $1.35/€ 63
3.5 Currency distribution of foreign exchange market turnover in April 2007 68
3.6 Foreign exchange market turnover by currency pair: daily turnover
in April 2007 68
3.7 Bids and asks on pounds 69
4.1 Settlements on a futures contract to purchase pounds 76
4.2 Realized spot rates and gains/losses on futures to buy euros 79
4.3 Impact of variables affecting currency call and put option premiums 86
4.4 Payoffs on euro call option 88
4.5 Payoffs on euro put option 90
4.6 Forwards, futures, and options compared 91
4A.1 European option put–call forward parity 97
6.1 Exchange rates and interest rates on different currency-denominated
three-month bank deposits 117
6.2 Points off the interest parity line 122
7.1 Summary format of the US balance of payments, 3rd quarter, 2007 148
7.2 International investment position of the United States, year-end 2004 160
11.1 China’s real growth and inflation 245
11.2 Proportion of global GDP by major area or country 249
12.1 Shifts in the IS–LM–BB diagram 269
12.2 Effectiveness of different macroeconomic policies 274
12.3 Macroeconomic conditions and appropriate policy 274
13.1 Exposure on a contractual asset: euro bank deposit 287
13.2 Exposure on a contractual liability: euro bank loan 288
13.3 Exposure on a noncontractual asset: Euro-zone exporter 288
13.4 Exposure on a noncontractual asset: Euro-zone exporter 289
13.5 Exposure on a noncontractual asset: Euro-zone importer 290
13.6 Exposure on a domestic exporter or import competer 290
13.7 Exposure on an import-oriented company 291
13.8 Exposure on a noncontractual asset: euro bond 291
13.9 Exposure on a noncontractual asset: dollar bond 292
13.10 Exposure on a noncontractual asset: foreign real estate 292
15.1 Dollar payments on £1 million accounts payable without hedging
and from using different hedging techniques 345

xv
ILLUSTRATIONS

15.2 Payoffs from different hedging techniques 352

16.1 Test of unbiasedness of forward rates as predictors of future spot rates,
monthly data, 1978–1987 366
16.2 Correlation coefficients between the yen–dollar spot rate and various
possible spot-rate predictors, 1974–1987 369
16.3 Correlation coefficients between the German mark–dollar spot rate and
various possible spot-rate predictors, 1974–1987 369
16.4 The performance of econometric-oriented services 373
16.5 Speculative return on capital from following the advice of econometric services 374
16.6 Speculative return on capital from following the advice of technical services 375
16.7 Connection between past changes in exchange rates and median forecasts
of future rates: different forecast horizons 378
16.8 Forecasting methods of Euromoney respondents 378
17.1 Factors affecting working-capital management 395
18.1 Monthly US dollar returns and risks for national stock markets, 1994–2002 406
18.2 Correlations between US dollar monthly returns in automobile
manufacturing, 1986–1991 406
18.3 Correlations between US dollar monthly returns in the consumer
electronics industry, 1986–1991 407
18.4 Composition of US dollar weekly returns on individual foreign stock markets, 1980–1985 410
18.5 Composition of US dollar weekly returns on an equally weighted portfolio
of seven countries’ stock markets, 1980–1985 410
19.1 Value of a £1 million concessionary loan 433
19.2 Adjusted present value elements for Turkish jeans factory 439
20.1 The 50 largest nonfinancial MNCs, ranked by total assets, 2005 453
21.1 Costs of foreign currency bonds 483
21.2 Sources of funds for subsidiaries 489
21.3 Mean and standard deviation of debt to asset ratios, sorted by
type of legal system 493
22.1 Change in balance sheets from $100 of primary deposits 507
22.2 Activities open to different institutions in different centers 515

EXHIBITS
1.1 Currency matters: corporate experiences 11
1.2 Getting a grip on globalization 13
1A.1 Who is benefiting from globalization? 27
2.1 Institutional basics of the foreign exchange market 41
2.2 An exchange on the exchange: a conversation between market-makers in
the foreign exchange market 44
3.1 Structure of the forward market 66
3.2 Differences between outright forwards and swaps 67
4.1 The scope for writing options 87
6.1 Carry trade and the sub-prime crisis 121
7.1 Extraterrestrial trade or the ether? Data difficulties in the balance of payments 156
9.1 A very long-term view of international financial arrangements 188
10.1 The Wonderful Wizard of Oz: a monetary allegory 211
10.2 Alphabet soup: ERM, EMS, ECU, and all that 218
11.1 Seeing the forest through the trees: the Bretton Woods vision 236
11.2 Bretton Woods faces the axe 239
11.3 The cost of change: conversion to the euro 247
11.4 The Bank for International Settlements 250

xvi
 ILLUSTRATIONS

11.5 International trade and the environment 253

12.1 Milton Friedman and Robert Mundell: giants of open-economy macroeconomics 266
13.1 Hedging horizons 301
13.2 Flying high: risk and exposure at American Airlines 303
14.1 A practical solution to estimating operating exposure 328
15.1 To hedge or not to hedge: Merck’s motives 339
15.2 To hedge or not to hedge? 341
16.1 The success of professional forecasters 376
16.2 Good luck or good judgment? 377
17.1 Decentralizing currency management at General Electric 394
18.1 Home bias and corporate governance 416
18.2 Evolution of capital market integration 420
19.1 Investment strategies: a dynamic matter 427
19.2 Competitive pressure to pursue FDI 428
20.1 Counting on a good name 456
20.2 Multinationals: creatures of market imperfections 460
20.3 Do US multinationals export jobs? 470
21.1 Overstating differences: US–Japanese borrowing costs are more
similar than they seem 477
21.2 Going abroad: the appeal of Euroequities 478
21.3 Special Drawing Rights (SDRs) 487
22.1 Foreign bank operations in the United States 510
22.2 Derivatives: differentiating the hyperbole 517
23.1 Just-in-time inventory systems: too late for the Merchant of Venice 529
23.2 US free-trade zones 536

xvii
 About the author

Since receiving his Ph.D. from the University of Chicago, Maurice Levi has taught and written research papers
in a wide variety of areas of finance and economics.This broad range of research and teaching interests form
the foundation for this book on international finance, a subject that he believes to be best treated as an appli-
cation of financial and economic principles, rather than as a separate and isolated subject area.
Professor Levi has published research papers on financial market anomalies, the effectiveness of monetary
and fiscal policy, the relationship between inflation and interest rates, the effect of taxes on international cap-
ital flows, and the link between inflationary expectations and unemployment, as well as in numerous areas of
international finance that are reflected in this book. He has also written in the areas of econometric methods,
macroeconomics, labor economics, environmental economics, money and banking, and regional economics.
His papers have appeared in just about every leading research journal in finance and economics, including:
American Economic Review; Econometrica; Journal of Political Economy; Journal of Finance; Journal of Monetary
Economics; Journal of Money, Credit and Banking; Journal of International Money and Finance; Journal of International
Economics; Review of International Economics; Management Science; Ecological Economics; and Journal of Econometrics.
He is also the author of Economics and the ModernWorld (Heath, Lexington, MA, 1994), Economics Deciphered:A
Layman’s Survival Guide (Basic Books, NewYork, 1981), and Thinking Economically (Basic Books, NewYork,
1985), and the coauthor, with M. Kupferman, of Slowth (Wiley, New York, 1980).
Since joining the Sauder School of Business of the University of British Columbia, Professor Levi has held
visiting positions at the Hebrew University of Jerusalem, the University of California, Berkeley, MIT, the
National Bureau of Economic Research, the University of Exeter, University of New South Wales, and the
London Business School. He has received numerous academic prizes and awards including Killam and Nomura
Fellowships and the Bronfman Award.

xix
 Preface

This book is intended for use in business and economics courses in international finance at the masters
or senior-undergraduate level. It is comprehensive, covering the financial markets, economic environment
and management of multinational business. It is designed to be used in its entirety in courses that cover
all areas of international finance, or selectively in courses dealing with only the financial markets and economic
environment, or the financial management of multinational business. To facilitate the selective use of
the book in the two major subdivisions of international finance, this fifth edition is divided into two
self-contained segments.
The book is specifically designed for students who have taken introductory economics and finance, and who
wish to build upon the basic economic and financial principles they have acquired. By assuming these funda-
mental prerequisites, this book is able to go further than competing texts in international finance. It is able to
introduce the student to the new and exciting discoveries and developments in this dynamic and rapidly
expanding field.These discoveries and developments, many of which have occurred during the last few years,
are extensions of the principles of finance and economics.
With a growing component of commerce taking on international proportions, an increasing number of
students have more than an academic interest in the subjects they take.After graduation, many will find they
need to apply directly what they have learned. Consequently, a good textbook in international finance must
cover practical managerial topics such as how to evaluate foreign investment opportunities, where to borrow
and invest, how exchange rates affect cash flows, how to measure foreign exchange exposure and risk, what
can be done to avoid exposure and risk, and the general financial management problems of doing business in
the global environment. However, even these highly practical topics can be properly dealt with only by apply-
ing basic economic and financial principles that many other international finance textbooks appear reluctant
to employ.As a result, despite adequate levels of preparation, the student often receives a rather shallow treat-
ment of international financial applications that fails to build on the foundations of previous courses. For this
reason, many senior-undergraduate- and masters-level students with solid backgrounds in, for example, the
consequences of arbitrage or the principles of capital budgeting feel they stop short of the frontiers of inter-
national finance.
This book represents a major revision and updating of the fourth edition of International Finance. In the fourth
edition a large amount of material on the international financial environment was covered separately in three
lengthy chapters at the very end of the book. Only two short chapters on the balance of payments and on the
simple supply and demand view of exchange rates were included early in the book. This meant that such
matters as modern theories of the determination of exchange rates and the evolution of the international
financial system were split into two disconnected parts. Instructors wanting to cover, for example, the case
for fixed versus flexible exchange rates or the conditions for success of a common currency had to jump

xxi
PREFACE

between chapters. In response to requests by several instructors who preferred the organization in earlier
editions of this book, all the material on the “big picture” of the international financial environment has been
grouped together in one integrated section.This section now also includes a chapter on open economy macro-
economics that discusses the effectiveness of monetary and fiscal policy under fixed and flexible exchange rates.
This international environment section comes after the markets have been discussed and before the section
on the financial management of multinational business. However, care has been taken so that in courses tak-
ing a managerial finance perspective, all or part of the section on the international financial environment can
be skipped without loss of continuity.
As with previous editions, a substantial revision has been necessary because the international financial
developments that are occurring are nothing short of spectacular. For example, new markets and instruments
are emerging at a frantic pace, in part as a response to exchange rates that at times have been so volatile they
have grabbed the headlines, not of the business section of the newspaper, but of the front page.The day-to-
day lives of people have been affected by events such as the introduction of the euro which represents an
unprecedented experiment in international financial cooperation, and the emergence of new economic super-
powers such as China and India. Liquidity crises such as that associated with the sub-prime mortgage situa-
tion have been linked to huge changes in exchange rates. Great fortunes have been made and lost in foreign
exchange. News reports have also been full of exchange rate crises, and economic summits dealing with the
architecture of the international economic system.At the same time, there has been an explosion of research
in international finance.The revisions in this fifth edition of International Finance reflect the important recent
developments and research that have sharpened the insights from studying this dynamic subject.
This book has evolved over a number of years while teaching or doing research at the Sauder School of
Business at the University of British Columbia and also at the Hebrew University, Jerusalem; the University
of California, Berkeley; the Massachusetts Institute of Technology; the London Business School; the University
of New South Wales; and the University of Exeter. I am indebted to all these institutions, especially the Sauder
School of Business, which has been my home base for over three decades.
An author’s debts are a pleasure to acknowledge, and in the course of five editions of this book I have
incurred many I would find difficult to repay.A large debt is owed to my colleague Ali Lazrak, who has pro-
vided valuable comments.The help offered by reviewers has also been immensely important in improving
the final product. Only the anonymity of the individual reviews prevents me from apportioning the vast credit
due to them. My wife, Kate, sons Adam and Jonathan, and daughter Naomi have provided professional and
indispensable help in preparing the manuscript.Too numerous to mention individually but of great impor-
tance were the students in my MBA and undergraduate courses in international finance at the University of
British Columbia, whose reactions have been a crucial ingredient in the revision of this text.
It is to my wife, Kate, that I owe my greatest thanks. In addition to playing a vital role in preparing and check-
ing the manuscript she has provided the moral support and encouragement that have made this fifth venture
a generally agreeable task.
Maurice Levi
Vancouver, B.C.

xxii
 Part I
International financial markets
and environment
Another random document with
no related content on Scribd:
 ¹⁰And Cush begat Nimrod: he began to be a
mighty one in the earth.
10. And Cush begat Nimrod] From the parallel passages in
Genesis (x. 10, 11) it is apparent that Nimrod is the name of an
individual, the traditional founder of the Babylonian-Assyrian Empire.
As Cush is here called the father of Nimrod and in verse 8 is the son
of Ham, Hebrew tradition would appear to have regarded Hamites as
the founders of the Babylonian power. Possibly the Redactor of
Genesis who combined these verses which belong to the tradition of
J with verses 5‒9 which are from “P” may have thought so. But in the
independent “J” narrative it is very probable that Cush, father of
Nimrod, represents the third or Kassite dynasty (Κοσσαῖοι) which
held sway in Babylon from about 1750‒1200 b.c. Even so, the
identification of Nimrod himself remains a puzzle, and it is not yet
possible to say whether he is a legendary or an historical character,
or partly both.

began to be a mighty one in the earth] i.e. was the first grand
monarch (for the idiom, compare Genesis ix. 20). In Genesis x. 9, he
is further and quaintly described as “a mighty hunter before the
Lord.”

¹¹And Mizraim begat Ludim, and Anamim, and

Lehabim, and Naphtuhim,
11. Ludim] reckoned in Jeremiah xlvi. 9 and Ezekiel xxx. 5
(Revised Version “Lud”) among the auxiliary troops of Egypt
(Mizraim). Probably not the Lydians of Asia Minor are meant, but a
people of north Africa not yet known. Both this word and Lehabim
may be variants for the Libyans, tribes west of Cyrene (compare 2
Chronicles xii. 3, xvi. 8). See also verse 17, note on Lud. Of the
Anamim, Naphtuhim, nothing is certainly known.

¹²and Pathrusim, and Casluhim (from whence

came the Philistines ¹), and Caphtorim.
 ¹ Hebrew Pelishtim.

12. Pathrusim] the inhabitants of Pathros (Isaiah xi. 11), i.e.

Upper Egypt.

Casluhim] not identified.

from whence came the Philistines] Elsewhere (Jeremiah xlvii. 4;

Amos ix. 7; compare Deuteronomy ii. 23) the Philistines are said to
have come from Caphtor. It is natural therefore to think that an
accidental transposition has taken place, and that this clause,
whence ... Philistines, originally followed Caphtorim. Note, however,
that the same order is found in Genesis x. 14.

Caphtorim] i.e. the inhabitants of Caphtor, which has usually

been taken to mean the island of Crete, but is also plausibly
identified with “Keftiu,” the south-west coastlands of Asia Minor.
Compare Macalister, The Philistines, pp. 4 ff.

¹³And Canaan begat Zidon his firstborn, and

Heth;
13. Canaan begat] Of the four sons of Ham—viz. Cush, Mizraim,
Put, Canaan—note that the sons of Put are omitted. After the sons of
Cush (verse 9), and of Mizraim (verse 11), we here pass to the sons
of Canaan.

Zidon his firstborn] From the time of David downwards Tyre takes
precedence of Zidon in any mention of the Phoenician cities in the
Old Testament, but Zidon was the older of the two cities, as is here
implied and as the Roman historian Justin (xviii. 3) asserts. So we
find the Phoenicians in the earlier books of the Old Testament called
Zidonians, not Tyrians (e.g. Judges iii. 3; 1 Kings v. 6). Homer also
refers not to Tyre but to Zidon.
 Heth] i.e. the Hittites, a northern non-Semitic race, who from
about 1800‒700 b.c. were a great power, extending over part of Asia
Minor and northern Syria from the Orontes to the Euphrates. The
references to them in the Old Testament make it probable that Hittite
settlements were to be found in various parts of Palestine. This fact
and their dominant influence, circa 1300 b.c., throughout Canaan
and Phoenicia probably accounts for their inclusion as a “son” of
Canaan.

¹⁴and the Jebusite, and the Amorite, and the

Girgashite;
14. the Jebusite] the ancient population of Jerusalem, compare
Judges i. 21; 2 Samuel v. 6.

the Amorite] compare Numbers xiii. 29, xxi. 21; Judges i. 35. The
name (probably a racial one) was frequently used of the pre-
Israelitish inhabitants of Canaan (“Canaanites” being the
geographical description). In a more restricted sense it was used to
denote the people of Sihon, east of the Jordan.

¹⁵and the Hivite, and the Arkite, and the Sinite;

¹⁶and the Arvadite, and the Zemarite, and the
Hamathite.
15. the Hivite] In Joshua xi. 3, the Hivites are placed in the
extreme north of the land, “the Hivite under Hermon,” but the word
may be an error for Hittite (see above verse 13). In Joshua ix. 7 and
Genesis xxxiv. 2 they are located at Gibeon and Shechem. The
Arkite and Sinite lived in Lebanon, the Arvadite (compare Ezekiel
xxvii. 8) on the sea-coast north of Gebal (Byblus), the Zemarite a
little to the south of the Arvadite, and the Hamathite furthest to the
north on the Orontes.

17 (= Genesis x. 22, 23).

The Sons of Shem.
 ¹⁷The sons of Shem; Elam, and Asshur, and
Arpachshad, and Lud, and Aram, and Uz, and
Hul, and Gether, and Meshech ¹.
¹ In Genesis x. 23, Mash.

17. The sons of Shem] These occupied the middle geographical

“zone.”

Elam] is the name of a land and nation north of the Persian Gulf
and east of Babylonia, and is often referred to in the Old Testament.
Though settled by Semites at a very early date, it was subsequently,
circa 2280 b.c., possessed by a non-Semitic race, who even
extended their power over Babylonia itself. The inclusion of Elam
among the Semites is doubtless due to its proximity to Asshur, and,
though not strictly correct, is very natural.

Asshur] The Assyrians, who are so frequently referred to in the

Old Testament, were mainly, if not entirely Semitic: a martial and
ruthless people whose conquests in the 14th‒7th centuries have
made them world-famous.

Arpachshad] a somewhat obscure name. In the last part (chshad)

the same consonants occur as in the name “Chasdim,” the
“Chaldees” of the Old Testament. Possibly two names have been run
together, the second being that of the Chaldees or Chaldeans, a
Semitic race who from circa 900 b.c. dominated Babylonia,
assimilating with the earlier Semitic inhabitants. This conjecture has
some support in the surprising fact that the Chaldeans are not
otherwise mentioned in the table; it is opposed by the fact that
Arpachshad occurs elsewhere, verse 24; Genesis x. 24, xi. 10 ff.

Lud] the name suggests the Lydians, but how this non-Semitic
people situated on the west coast of Asia Minor comes to be
included with Asshur and Aram as a son of Shem is a mystery.
Possibly therefore a Semitic region, called Lubdu, between Tigris
and Euphrates is meant.

Aram] the “Syrians” of the Authorized Version; better called

Arameans. They were widely settled in the lands to the north and
north-east of Palestine, with important centres in Damascus (Syria
proper) and the north of the Euphrates valley (the Aram-Naharaim of
the Old Testament). So great and lasting was their influence on
Israel that the Aramean dialect eventually superseded Hebrew and
was the ordinary language of Palestine in the time of Christ.

Uz] From Genesis x. 23 it appears that in Chronicles the words

“And the children of Aram ¹” have dropped out, so that “Uz” etc.
appear as the immediate descendants of Shem.

¹ The Alexandrine MS. (A) of the LXX. has the words.

Neither Uz nor the three following names have been satisfactorily

identified. For “Meshech” Genesis x. 23 (Hebrew but not LXX.) reads
“Mash.”

18‒23 (= Genesis x. 24‒29).

Appendix to the Sons of Shem.
South Arabian Tribes.

¹⁸And Arpachshad begat Shelah, and Shelah

begat Eber.
18. Eber] The Hebrew word usually means “the land beyond” and
may have originated as a personification of the population beyond
the Euphrates. It is further possible that Eber is an eponym, not
merely of the Hebrews, but of the Habiri, a much wider stock of
Semitic nomads, of whom the Hebrews formed an element, and who
overran and harassed the settled peoples of Palestine in the fifteenth
century b.c.
 ¹⁹And unto Eber were born two sons: the
name of the one was Peleg; for in his days the
earth was divided; and his brother’s name was
Joktan.
19. two sons] one (Peleg) representing, roughly speaking, the
northern or Mesopotamian Semites; the other (Joktan), the south
Arabian tribes.

Peleg] see below on verse 25.

²⁰And Joktan begat Almodad, and Sheleph,

and Hazarmaveth, and Jerah; ²¹and Hadoram,
and Uzal, and Diklah; ²²and Ebal ¹, and
Abimael, and Sheba; ²³and Ophir, and
Havilah, and Jobab. All these were the sons of
Joktan.
¹ In Genesis x. 28, Obal.

20. Joktan begat Almodad] All the names of the sons of Joktan
here given, so far as they have been identified, represent peoples
situated in south Arabia or on the west coast of the Red Sea lying
over against south Arabia. The only familiar name is that of the
unidentified Ophir, which possibly but not certainly may be the “El
Dorado” to which Solomon sent his fleet for gold.

24‒27.
The Descent of Abraham from Shem.

These verses are compressed within the smallest limits from

Genesis xi. 10‒26. For another example of this extreme abbreviation
compare verses 1‒4 (= Genesis v. 3‒32).
 ²⁴Shem, Arpachshad, Shelah; ²⁵Eber,
Peleg, Reu; ²⁶Serug, Nahor, Terah; ²⁷Abram
(the same is Abraham).
25. Peleg] the name perhaps signifies “Division” (see verse 19),
and may refer to some great period of migration among the Semitic
tribes.

28‒31 (= Genesis xxv. 12‒16).

The Descent of the Ishmaelite Tribes from Abraham

²⁸The sons of Abraham; Isaac, and Ishmael.

²⁹These are their generations: the firstborn
of Ishmael, Nebaioth; then Kedar, and Adbeel,
and Mibsam,
29. Nebaioth] Compare Isaiah lx. 7.

Kedar] Isaiah xxi. 13‒17.

³⁰Mishma, and Dumah, Massa; Hadad, and

Tema,
30. Dumah] Isaiah xxi. 11.

Massa] Proverbs xxxi. 1 (Revised Version margin).

Hadad] The name begins with the Hebrew letter Ḥēth and
therefore differs from the Hadad of verse 46 and of verse 50 and of 2
Chronicles xvi. 2 in which the first letter is Hē, a softer guttural than
Ḥeth.

Tema] Isaiah xxi. 14.

 ³¹Jetur, Naphish, and Kedemah. These are the
sons of Ishmael.
31. Jetur, Naphish] compare v. 18‒22.

32, 33 (= Genesis xxv. 1‒4).

The Descent of Arabian Tribes from Abraham through
Keturah

³²And the sons of Keturah, Abraham’s

concubine: she bare Zimran, and Jokshan,
and Medan, and Midian, and Ishbak, and
Shuah. And the sons of Jokshan; Sheba, and
Dedan.
32. Keturah] called a wife of Abraham in Genesis xxv. 1. The
Chronicler by calling her a concubine may imply that he considered
that the tribes descended from her were not so closely akin to Israel
as the Ishmaelites, or possibly he held that Sarah ought to be the
only wife of Abraham, and “corrects” his source accordingly.

Medan, Midian] Kindred tribes often bore names only slightly

differing in form.

Midian] In Judges viii. 14 the Midianites are reckoned as

Ishmaelites.

Sheba, and Dedan] Sheba and Dedan in verse 9 (which belongs

to the same source P) are included among the Hamitic peoples.
Doubtless the names in the present passage, which comes from J,
refer to the same tribes; but J follows a different tradition as to their
origin. Possibly there is truth in both views, and the people of Sheba
were of mixed African and Arabian descent.
 ³³And the sons of Midian; Ephah, and Epher,
and Hanoch, and Abida, and Eldaah. All these
were the sons of Keturah.
33. Ephah] Isaiah lx. 6.

Hanoch] as Genesis xxv. 4. Compare verse 3.

34‒37 (compare Genesis xxxvi. 10‒14).

The Descent of the Tribes of Edom from Abraham.

³⁴And Abraham begat Isaac. The sons of

Isaac; Esau, and Israel.
³⁵The sons of Esau; Eliphaz, Reuel, and
Jeush, and Jalam, and Korah.
34. Esau] “Esau is Edom,” Genesis xxxvi. 1, 8.

³⁶The sons of Eliphaz; Teman, and Omar,

Zephi ¹, and Gatam, Kenaz, and Timna, and
Amalek. ³⁷The sons of Reuel; Nahath, Zerah,
Shammah, and Mizzah.
¹ In Genesis xxxvi. 11, Zepho.

36. Teman] Amos i. 11, 12; Habakkuk iii. 13. The word means
South, and is applied in the first passage to Edom itself, in the
second to the wilderness of Edom, both being south of Canaan.

Kenaz] Other references (Judges i. 13, iii. 9, 11) show a close

connection with Caleb, which in turn implies that the Calebites were
closely related to the Edomites (compare iv. 13).
 Amalek] the eponymous ancestor of the Amalekites who lived in
the south and south-east of Palestine, see iv. 42 f.

38‒42 (compare Genesis xxxvi. 20‒28).

The Genealogy of the Horite Inhabitants of Seir.

³⁸And the sons of Seir; Lotan and Shobal and

Zibeon and Anah, and Dishon and Ezer and
Dishan. ³⁹And the sons of Lotan; Hori and
Homam ¹: and Timna was Lotan’s sister.
¹ In Genesis xxxvi. 22, Hemam.

38. The sons of Seir] Chronicles omits the further description

given in Genesis “the Horite, the inhabitants of the land,” words
which show clearly that these “sons of Seir” were not descendants of
Esau, but aboriginal inhabitants of the land.

Lotan] perhaps to be connected with Lot, a name anciently

associated with the land or people dwelling east of the Jordan
(compare Genesis xix. 30).

⁴⁰The sons of Shobal; Alian ¹ and Manahath

and Ebal, Shephi ² and Onam. And the sons of
Zibeon; Aiah and Anah. ⁴¹The sons of Anah;
Dishon. And the sons of Dishon; Hamran ³ and
Eshban and Ithran and Cheran. ⁴²The sons of
Ezer; Bilhan and Zaavan, Jaakan ⁴. The sons
of Dishan; Uz and Aran.
¹ In Genesis xxxvi. 23, Alvan.

² In Genesis xxxvi. 23, Shepho.

 ³ In Genesis xxxvi. 26, Hemdan.

⁴ In Genesis xxxvi. 27, and Akan.

40. Aiah and Anah] See Genesis xxxvi. 24.

43‒51a (compare Genesis xxxvi. 31‒39).

The early Kings of Edom.

⁴³Now these are the kings that reigned in the

land of Edom, before there reigned any king
over the children of Israel: Bela the son of
Beor; and the name of his city was Dinhabah.
⁴⁴And Bela died, and Jobab the son of Zerah
of Bozrah reigned in his stead. ⁴⁵And Jobab
died, and Husham of the land of the
Temanites reigned in his stead.
43. kings] Note that the kings are of different families and
localities. They may be compared with the “judges” of early Israel.

in the land of Edom] In early times the mountainous region of

Seir, extending from the south-east of the Dead Sea to the Gulf of
Akaba, but the precise territory of the Edomites is uncertain and of
course must have varied from time to time. In the post-exilic period
Edomites (Idumeans) pressed up into the south of Judah (compare
ii. 42), and Edom (Idumea) continued to play an important and often
sinister part in the history of Israel till long after the Chronicler’s
lifetime. See (e.g.) 1 Maccabees v. 65; 2 Maccabees x. 14‒17. The
Herods were of Edomite descent.

before ... Israel] i.e. before Saul; or possibly “before David,” if the
phrase means before the reign of the first Israelitish king over Edom.
For the use made of this statement in the discussion of the date of
the Hexateuch, see Chapman, Introduction to the Pentateuch, p. 40,
in this series.

Bela the son of Beor] possibly the same as the familiar Balaam
son of Beor, the consonants of the names differing in Hebrew only by
the final m. See, however, Gray, Numbers (International Critical
Commentary), pp. 315, 324.

⁴⁶And Husham died, and Hadad the son of

Bedad, which smote Midian in the field of
Moab, reigned in his stead: and the name of
his city was Avith. ⁴⁷And Hadad died, and
Samlah of Masrekah reigned in his stead.
46. smote Midian in the field of Moab] An isolated historical
notice, interesting as showing the power of Edom at some period.
The Midianites centred round the lands east of the Gulf of Akaba, but
bands of them were constantly pushing northwards and harassing
the territories of Edom, Moab, and Israel (compare Numbers xxii. 4;
Judges vi.; etc.).

⁴⁸And Samlah died, and Shaul of Rehoboth by

the River reigned in his stead. ⁴⁹And Shaul
died, and Baal-hanan the son of Achbor
reigned in his stead.
48. Rehoboth by the River] not “the River,” par excellence (i.e.
the Euphrates), as the Revised Version translators supposed; but
either the Wady el-Arish, the stream on the boundary of Egypt or
Palestine; or else a river in north Edom, Rehoboth being
distinguished from other places of the same name by being the city
on its banks.
 ⁵⁰And Baal-hanan died, and Hadad ¹ reigned in
his stead; and the name of his city was Pai ²:
and his wife’s name was Mehetabel, the
daughter of Matred, the daughter of Me-
zahab.
¹ In Genesis xxxvi. 39, Hadar.

² In Genesis xxxvi. 39, Pau.

50. Hadad] As in verse 46; in Genesis xxxvi. 39, “Hadar.”

Possibly the king whom David overthrew, 2 Samuel viii. 14, compare
1 Kings xi. 14 (perhaps a son of this Hadad).

⁵¹And Hadad died.

51a. And Hadad died] repeated by a copyist’s error from verse
47; the words are not found in Genesis.

51b‒54 (compare Genesis xxxvi. 40‒43).

The “Dukes” of Edom.

And the dukes of Edom were; duke Timna,

duke Aliah ¹, duke Jetheth; ⁵²duke Oholibamah,
duke Elah, duke Pinon; ⁵³duke Kenaz, duke
Teman, duke Mibzar; ⁵⁴duke Magdiel, duke
Iram. These are the dukes of Edom.
¹ In Genesis xxxvi. 40, Alvah.

51b. dukes] The word means “leader of a thousand.” The list

which follows is probably topographical, not chronological. It seems
to give the names of the districts into which Edom was divided at the
time when the list was drawn up.

duke Timna, etc.] Render, the duke of Timna, etc.

Aliah] In Genesis xxxvi. 40, “Alvah.”

 Chapters II.‒VIII.
The Genealogies of the Tribes of Israel.
Attention is now narrowed down to those in the true line of
descent, from Abraham through Isaac (“in Isaac shall thy seed be
called,” Genesis xxi. 12) and from Isaac through Jacob = Israel,
Genesis xxxii. 28 (compare Genesis xxvi. 2‒4).

The Chronicler deals very unequally with the tribes in their

genealogies; as the following table shows:

ii. 1‒iv. 23. Judah (102 verses).

iv. 24‒43. Simeon (20 verses).

v. 1‒26. Reuben, Gad, and Eastern Manasseh (26 verses).

vi. 1‒81. Levi (81 verses).

vii. 1‒40. Issachar, Zebulun, and Dan (according to a

correction of the text, vii. 6‒11, and 12), Naphtali,
Eastern Manasseh (again), Ephraim, and Asher (40
verses).

viii. 1‒40. Benjamin (40 verses).

It may easily be seen that the tribes in which the Chronicler is

really interested are the three southern tribes, Judah, Simeon, and
Benjamin, together with the priestly tribe, Levi.

The order in which the tribes are mentioned is geographical,

Judah and Simeon the southern tribes first, then the eastern tribes,
Reuben, Gad, Manasseh; then (conveniently) Levi, and then the
northern tribes of western Palestine, ending with Benjamin (viii., ix.
35‒44) and the list of inhabitants of Jerusalem (in ix. 1‒34).

Chapter II.
1, 2 (compare Genesis xxxv. 22b‒26).
The Sons of Israel.

¹These are the sons of Israel; Reuben,

Simeon, Levi, and Judah, Issachar and
Zebulun; ²Dan, Joseph and Benjamin,
Naphtali, Gad and Asher.
II. 3‒IV. 23.
Genealogies of Judah.

3‒17.
Descendants of Judah to the Sons of Jesse.

³The sons of Judah; Er, and Onan, and

Shelah: which three were born unto him of
Bath-shua the Canaanitess. And Er, Judah’s
firstborn, was wicked in the sight of the Lord;
and he slew him. ⁴And Tamar his daughter in
law bare him Perez and Zerah. All the sons of
Judah were five. ⁵The sons of Perez; Hezron
and Hamul.
 5. The sons of Perez; Hezron and Hamul] So Genesis xlvi. 12.
The only reference in the Old Testament to Hamulites is Numbers
xxvi. 21. On the other hand Hezron, a south Judean tribe (Joshua xv.
3), is a clan of the first importance in the genealogies. From Hezron
are descended not only the family of David (verse 15), but also the
great Calebite and Jerahmeelite clans (verses 18‒24, 25‒33, etc.).
The name Hezron might bear the significance “an enclosed place” as
opposed to movable encampments, and Atarah (verse 26) who is
said to be the mother of certain Jerahmeelite families has much the
same meaning. Both names therefore may not be eponymous either
of individuals or places, but may originate in the desire to preserve
the fact that the families named as their sons were nomads who had
abandoned wandering for settled life. If so, it might help to explain
the fact that Hezron (compare Carmi, ii. 7, iv. 1, v. 3) is also
mentioned as a son of Reuben (v. 3; Genesis xlvi. 9, etc.).

⁶And the sons of Zerah; Zimri ¹, and Ethan, and

Heman, and Calcol, and Dara ²: five of them in
all.
¹ In Joshua vii. 1, Zabdi.

² Many ancient authorities read, Darda. See 1 Kings iv. 31.

6. the sons of Zerah] This genealogy appears only in Chronicles.

Zimri] LXX. (B) Ζαμβρεί (β being merely euphonic) here and also
Joshua vii. 1 where Hebrew has “Zabdi.” LXX. is probably right in
identifying the two. Either form might arise from the other by easy
textual corruption.

Ethan ... Dara] Read, Darda with Vulgate, Targum, Peshitṭa The
same four names in the same order occur 1 Kings iv. 31 as the
names of wise men whom Solomon surpassed in wisdom. They are
there called sons of “Mahol” who may have been either a nearer or
remoter ancestor than Zerah. Ethan however is there called the
Ezrahite (= probably “son of Zerah”). [Psalms lxxxviii., lxxxix. bear
respectively the names “Heman the Ezrahite,” “Ethan the Ezrahite,”
but these (it seems) were Levites (compare xv. 17, 19, where see
note).]

⁷And the sons of Carmi; Achar ¹, the troubler of

Israel, who committed a trespass in the
devoted thing. ⁸And the sons of Ethan;
Azariah.
¹ In Joshua vii. 1, Achan.

7. the sons of Carmi] Carmi is probably to be taken as the son of

Zimri (= Zabdi, Joshua vii. 1). Targum however has “Carmi who is
Zimri.” See note on Zimri, verse 6.

Achar] This form of the name (instead of “Achan,” Joshua vii. 1)

is used by the Chronicler to bring out better the play on the Hebrew
word for “troubler.” The Hebrew runs, “Achar ocher Israel.”

⁹The sons also of Hezron, that were born unto

him; Jerahmeel, and Ram, and Chelubai.
9. Jerahmeel] For his descendants see verses 25‒41. The
descendants of his younger brother Ram are given first. They
purport to be the ancestry of David and his family.

Chelubai] Another form of “Caleb”; see note on verse 42.

¹⁰And Ram begat Amminadab; and

Amminadab begat Nahshon, prince of the
children of Judah; ¹¹and Nahshon begat
Salma, and Salma begat Boaz; ¹²and Boaz
begat Obed, and Obed begat Jesse;
 10. Ram] The descent of David from Judah is given also in Ruth
iv. 18‒22 and Matthew i. 3‒6. Ram as a clan parallel with the great
clans of Caleb and Jerahmeel is strange; for it is not known
otherwise in the Old Testament Further, as the descendants of Ram
given in verses 10‒12 are the family tree of David (contrast the clans
and cities in the lines of Caleb and Jerahmeel) it may be supposed
that Ram owes his position here simply to the Chronicler’s desire to
incorporate Ruth iv. 19, where also this pedigree of David is given.
Note also that in verse 25 a Ram is mentioned as a son of
Jerahmeel and grandson of Hezron.

Nahshon, prince, etc.] See Numbers i. 4, 7, ii. 3.

¹³and Jesse begat his firstborn Eliab, and

Abinadab the second, and Shimea the third;
13. Shimea] so also xx. 7; but “Shammah” 1 Samuel xvi. 9.

¹⁴Nethanel the fourth, Raddai the fifth;

14. Nethanel] the same name as Nathanael (John i. 45). The
fourth, fifth and sixth brothers are not elsewhere named.

¹⁵Ozem the sixth, David the seventh:

15. David the seventh] Jesse had eight sons (1 Samuel xvii. 12;
compare xvi. 10, 11). Here one seems deliberately passed over,
perhaps because he had no children. (The Elihu “one of David’s
brethren” of 1 Chronicles xxvii. 18 is probably to be identified with
Eliab and not to be regarded as an eighth brother.)

¹⁶and their sisters were Zeruiah and Abigail.

And the sons of Zeruiah; Abishai ¹, and Joab,
and Asahel, three.
 ¹ Hebrew Abshai.

16. sons of Zeruiah] Joab and his brothers are always thus
named after their mother; perhaps their father died while they were
young, or we may have a relic here of the ancient method of tracing
kinship through the mother.

¹⁷And Abigail bare Amasa: and the father of

Amasa was Jether the Ishmaelite.
17. the Ishmaelite] 2 Samuel xvii. 25, “the Israelite,” an error
yielding no satisfactory sense.

18‒24 (compare verses 42‒55.)

Descendants of Caleb.

¹⁸And Caleb the son of Hezron begat children

of Azubah his wife, and of Jerioth: and these
were her sons; Jesher, and Shobab, and
Ardon. ¹⁹And Azubah died, and Caleb took
unto him Ephrath, which bare him Hur.
18. Caleb] a clan dwelling in southern Judea, and probably
distinct from Judah in the time of David (1 Samuel xxv. 3, xxx. 14).
Other references to them or rather their reputed founder Caleb ben
Jephunneh the Kenizzite (Numbers xxxii. 12; Joshua xiv. 6, 14; 1
Chronicles i. 36, where see note on Kenaz) point to an original
connection with the Edomites. Their importance in these lists is
explained by the fact that they were incorporated in Judah, and, after
the exile, occupied townships close to Jerusalem (verses 50‒55)
“forming possibly the bulk of the tribe in post-exilic Judah, since the
Chronicler knows so few other families” (Curtis, Chronicles p. 89).
See also W. R. Smith, Old Testament in the Jewish Church, p. 279
ad fin.