INTERNATIONAL FINANCE

INTRODUCTION
International finance is the branch of economics that studies the dynamics
of exchange rates, foreign investment, and how these affect international
trade. It also studies international projects, international investments and
capital flows, and trade deficits. It includes the study of futures, options and
currency swaps. Together with international trade theory, international
finance is also a branch of international economics.

There are various global bodies regulating different aspects of international

finance. These include:

IFC: International Finance Corporation is a prominent entity supporting

sustainable investments in the private sector of developing countries to
stimulate their growth. It is the biggest source of multilateral loans and equity
financing for projects undertaken by the private sector in developing
countries. IFC plays a key role in providing technical assistance to businesses
and governments of developing countries.

IMF: International Monetary Fund monitors the balance of payments of its

member countries. It is regarded as the lender of last resort for countries
facing a financial crisis, such as deficits and currency crisis. The relief
amount is relative to the size of the country’s contribution in the global
trading system.

World Bank: It funds the development of projects, mainly in

developing countries, that are not financed by the private sector.

WTO: World Trade Organization resolves multilateral and bilateral trade

disputes in addition to the negotiation of different trade agreements among its
various member nations.
BENEFITS
Some of the benefits of international finance are:

• Access to capital markets across the world enables a country to

borrow during tough times and lend during good times.
• It promotes domestic investment and growth through capital import.
• Worldwide cash flows can exert a corrective force against bad
government policies.
• It prevents excessive domestic regulation through global financial
institutions.
• International finance leads to healthy competition and, hence, a more
effective banking system.
• It provides information on the vital areas of investments and leads to
effective capital allocation.
• International finance promotes the integration of economies,
facilitating the easy flow of capital. The free transfer of funds would
eventually result in more equality among countries that are a part of
the global financial system.