International finance is a branch of financial economics that deals with the monetary interactions that occur between two or more countries. This section is concerned with topics that include foreign direct investment and currency exchange rates. It also involves issues pertaining to financial management, such as political and foreign exchange risk that comes with managing multinational corporations.
Importance of International finance
International finance plays a pivotal role in the international trade and in the sphere of exchange of goods and services among the nations
The following points highlight the importance of international finance.
1. International finance helps in calculating exchange rates of various currencies of nations and the relative worth of each and every nation in terms thereof.
2. It helps in comparing the inflation rates and getting an idea about investing in international debt securities.
3. It helps in ascertaining the economic status of the various countries and in judging the foreign market.
4. International Financial Reporting System (IFRS) facilitates comparison of financial statements made by various countries.
5. It helps in understanding the basics of international organisations and maintaining the balance among them.
6. International finance organisations such as IMF, World Bank etc. mediate and resolve financial disputes among member nations.