WHAT IS INTERNATIONAL
FINANCE?
- Deals with the management of
finances in a global business.
- It explains how to trade in
international market
- Deals with economic
interactions between multiple
countries, rather than narrowly
focusing on individual markets.
- It is also known as international
macroeconomics, the study of
monetary interactions between
two or more countries focusing
on the areas such as foreign
direct investment and currency
exchange rates.
- How to exchange foreign
currency
- And how to earn profit through
such activities
International finance is an important
part of financial economics. It mainly
discusses the issues related with
monetary interactions of at least two or
more countries.
- Exchange rate currencies
- Monetary policies
- Monetary transactions
- Monetary systems of the world
- And other issued associated
with international financial
management
Like international trade and business,
international finance exists due to the
fact that economic activities of
businesses, governments and
organizations get affected by the
existence of nations. It is a known fact
that countries often borrow and lend
from each other. In such trades, many
countries use their own currencies.
Therefore, we must understand how
the currencies compare with each
other.
Explanation:
Whole world is globalized now. No
country can stand alone, we need to
socialize, we need to network. This is
for businesses and other affairs.
Example is the Factor of production
(land, labor and capital). Countries
exchange. They borrow from each
other.
How currencies when it crosses the
boarder works, how international
finance works in actual situation.
EXAMPLES of INTERNATIONAL
FINANCE
1. Suppose XYZ company sending
financial assets from its US
head office to branch in
Malaysia. This funds transfer is
between the same ownership;
however, it did get cross nation
boundaries. This is a best
example to understand the type
of international finance.
2. Suppose there is an exchange
of products between two
companies. ABC company is
willing to send 100,000 high-
end phones from South Korea
to DEF company on Malaysia.
Whereas DEF company has
agreed to send him 30,000
high-end smart TVs as an
exchange trade from Malaysia
to South Korea. Here we
noticed that any trade which
occurs at international
boundaries need to follow all
the international finance rules
and regulations.
IMPORTANCE OF INTERNATIONAL
FINANCE
International trade is one of the most
important factors for growth and
prosperity of participating economies.
It’s important has got magnified many
times due to globalization.
(Country can grow in terms of
economy development dimensions)
It creates jobs, opportunities.
Advancement of technology.)
For example, the resurgence of the US
from being the biggest international
creditor to become the largest
international debtor is an important 2.
issue. These issues are a part of
international macroeconomics, which
is popularly known as international
finance.
1. It plays a critical role in 3.
international trade and inter-
economy exchange of goods
and services. It is important for
a number of reasons, the most
notable one is listed here:
a. International finance 4.
is an important tool to
find the exchange
rates, compare
inflation rates, get an
idea about investing 5.
in international debt
securities, ascertain
the economic status
of other countries and
judge the foreign
markets.
(tool to find out the
exchange rates of
different countries, 6.
inflation rates)
b. Exchange rates are
very important in
international finance,
as they let us 7.
determine the relative
values of currencies.
International finance
helps in calculating
these rates. (how to
calculate).
c. Various economic
factors help in making
international
investment decisions.
Economic factors of
economies help in
determining whether
or not investors’
money is safe with
foreign debt
securities.
International finance has grown
in stature due to globalization. It
helps understand the basics of
all international organization
and keeps the balance intact
among them.
An international finance system
maintains peace among the
nations. Without solid finance
measure, al nations would work
for their self interest.
International finance helps in
keeping the issue at bay.
International finance
organizations, such as IMF, the
World bank, provide a
mediators’ role in managing
international finance disputes.
International Financial
Recording System (IFRS) is
an important factor for many
stages of international finance.
Financial statement made by
the countries that have adopted
IFRS are similar. It helps many
countries to follow similar
reporting system.
IFRS system, which is a part of
international finance, also helps
in saving money by following
the rules of reporting in a single
accounting standard.
Without international finance,
chances of conflicts and
thereby, a resultant mess, is
apparent. International finance
 helps keep international issues
in a disciplined state.
INTERNATIONAL FINANCIAL
GLOBALIZATION
In the last two decades, the financial
economies have increasingly got
interconnected around the world. The
impact of globalization has been felt in
every aspect of economy.
This is because of globalization.
Advancement of technology, industrial
revolution, technological advancement.
Industry 4.0. Easy to communicate
with other. Deal with other
counterparts. Everything can be done
online. (anything). Even during COVID,
anything we can do online.
Financial globalization has offered
substantial benefits to the national
economies and to both investors and
wealth creators. However, it has a
wreaking effect on financial markets as
well.
Explanation:
The advancement of technology and
globalization, it helps us more involve
in more international services.
WHY STUDY INTERNATIONAL
FINANCE?
The world of business is getting
smaller. With advances in technology
making international transactions a lot
easier. More and more companies are
looking for people with knowledge of
the global financial market.
HOW IS THIS?
1. See the World
Studying international finance is
an excellent opportunity to
launch your international career.
It will give you global skills,
allowing you to move across the
world and be employed in
hundreds of major economic
centers. You will develop a
broad vision and understanding
of the changing role and nature
of finance within the context of a
global marketplace. You will
also become competent in
dealing with international
investment and financing
transactions, international
payments and exchange rates.
2. Help at Home
You don’t have to go far to put
your international finance
degree to use- the area is
important for businesses when
dealing with overseas
companies and international
markets. (exchange rates,
foreign economies. Foreign
capital markets, foreign loans,
etc)
Studying international finance
will provide you with the
knowledge and professional
skills to develop a career in
banking, financial institutions or
any other business dealing with
international operations, and
may include such positions as
international credit and loan
officer, financial advisor, lobal
risk manager, treasury
assistant, consultant and many
more.
3. New Developments
Studying international finance is
a good opportunity to learn
about the latest developments
in the finance industry as a
whole, because many of them
impact directly on international
transactions and markets. This
 includes such as international
payments, FinTech, digital 1. Advancement in information
banking, cryptocurrencies and and communication
so on. technologies (ICT)

For example: - Technological advancements

have made market players and
The UN suggests that the area governments far more efficient
of international payments has in collecting the information
become critical for many needed to manage financial
businesses, but the average risks.
cost (about 7% transaction) and
slow average processing time 2. Globalization of national
are holding back global economies (domestic
economic growth. The aim is to economy to make it
make the average cost closer to globalized)
3% in the near future. - Economic globalization has
made production, consumption
4. Universal Skills and investment dispersed over
various geographic locations.
Through studying international As barriers to international trade
finance, you will also learn a have been lowered,
wide range of advanced international flows of goods and
financial techniques that are services have dramatically
applicable in a range of jobs increased.
and companies, both
international and domestic. 3. Liberalization of national
financial and capital markets
You will learn how to raise - Liberalization and fast
funds for your company using improvements in IT and the
international markets, including globalization of national
international IPOs. economies have resulted in
highly spread financial
You will learn how to deal with innovations. It has increased
international venture capital and the growth of international
private equity firms, as well as capital movements. (Money
with international crowdfunding should be money. Economic
platforms to help small and activities. More active economy,
innovate firms raise funds for attract more foreign investment.
their businesses. Economy more accessible. It
creates more job. Every country
DRIVING FORCES OF FINANCIAL liberalize the economy)
GLOBALIZATION
4. Competition among
When we talk about financial intermediary services
globalization (meaning a company providers
can raise fund from other countries - Competition has increased
crossing the boarders) there are four manifold due to technological
major factors to be considered. advancement and financial
These are: liberalization. A new class of
 nonbank financial entities, 1. The risk of a “credit crunch”
including institutional investors, has been reduced to extremely
have also emerged. (If market is low levels. When banks are
not accessible, few market under strain, they can now raise
players, but if it is accessible, funds from international capital
more investors) markets.
2. With more choices, borrowers
CHANGES IN CAPITAL MARKETS and investors get a better
DUE To GLOBALIZATION AND pricing on their financing.
ADVANCEMENT OF TECHNOLOGY Corporations can finance the
investment more cheaply.
The driving forces of financial (Options available online, you
globalization have led to four dramatic can always compare)
changes in the structure of national
and international capital markets. RISKS OF FINANCIAL
GLOBALIZATION
1. Banking systems have been
under a process of 1. Markets are now extremely
disintermediation. Financial volatile, and this can be a threat
intermediation is happening to financial stability. Financial
more through tradable globalization has altered the
securities and not through bank balance of risks in international
loans and deposits. capital markets. (the
2. Cross border financing has competition is high, extremely
increased. Investors are now volatile)
trying to enhance their returns 2. Creditworthy banks and
by diversifying their portfolios businesses in emerging
internationally. They are now markets can now reduce their
seeking the best investment borrowing costs. However,
opportunities from around the emerging markets with weak or
world. (Expanded opportunity) poorly managed banks are at
3. Non-banking financial risk. (banks from Malaysia can
institutions are competing with be competing with banks in the
banks in national and US) merging of banks
international markets,
decreasing the prices of
financial instruments. They are
taking advantage of economies
of scale. (Banking services)
4. Banks have accessed a market SAFEGUARDING FINANCIAL
beyond their traditional STABILITY
businesses. It has enabled the
banks to diversify their  The crises of the 1990s have
sources of income and the shown the importance for a
risks. prudent sovereign debt
management, effective capital
BENEFITS OF FINANCIAL account liberalization, and
GLOBALIZATION management of domestic
financial systems. (saving
behavior for the future)
 Private financial institutions and
market players can now
contribute to financial stability
by managing their businesses
well and avoiding unnecessary
risk-taking. (learn to manage
our finances)
 As financial stability is a global
public good, governments and
regulators also play a key role
in it. The scope of this role is
increasingly getting
international.
 The IMF is a key role-player as
well. Its global surveillance
initiatives to enhance its ability
to manage international
financial stability must also stay
in track.