International finance studies the circulation of money between countries.
International finance studies the flow of cash between different countries. It must be taken into account that finance constitutes a branch of economics that is responsible for the management of money .
This discipline can be divided into two branches of study: international economics (which takes into account the exchange rate , interest rates and other financial aspects) and corporate finance (the study of markets and financial products).
Given the phenomenon of globalization , which implies the free movement of capital and the lifting of different types of restrictions (physical, customs and tax), international finance has acquired particular importance.
International finance and currencies
An important concept within this area is that of currency , which is the currency of a country that is convertible into the currency of another foreign country in the exchange market. For this, there is internal convertibility (the possibility of buying and selling foreign currencies in a country) and external convertibility (the price of a national currency in the exchange markets of other countries).
This exchange rate can be fixed (when the central bank establishes the value of the currency and intervenes in the exchange market) or flexible (the central bank does not intervene in the market, so the value of the currency is subject to free play. of supply and demand ).
On the other hand, it should be noted that the balance of all economic transactions of a country with the rest of the world is known as the balance of payments . Income and expenditure of foreign currency are recorded there.
The exchange rate is a very important variable in international finance.
The importance of the value of coins
Knowing the situation of the currencies of various countries can be extremely important for various businessmen because it allows them to have an idea of the consequences that international economic events can bring to their establishments ; It can also help them to know how to take advantage of the various opportunities that the international environment offers them to promote the growth of their own economy (invest in a certain stock market , buy money in a certain currency, etc.).
In addition, it will be able to carry out efficient transactions using the various technologies available to businessmen and collaborate with the economic integration of the different sectors of a society, helping those countries that are involved in those agreements that are affected by the transaction that is being carried out. execute.
What are international finances for?
International finance serves to understand the fate of development and the economy of the entire world and to prevent companies from certain downturns that the system may suffer, avoiding bankruptcy or minor problems.
Within international finance, two well-defined groups are known, as we already indicated: the international economy (in charge of adjusting imbalances in the balance of payments and regulating exchange rate regimes) and corporate finance (which governs the functioning of the various financial markets. , evaluate the exchange risk and speculate in currencies by investing in the appropriate international markets )
It is worth mentioning that the financial system , also known as the international monetary system , is made up of those institutions that are responsible for intermediating between the various countries when carrying out monetary transactions; One of its fundamental functions is the fixing of exchange rates in the different currencies and the forecasting of the consequences that such transactions can bring to the countries involved in it.
Finally, we can add that timely knowledge of the economic line that governs certain countries can be extremely important for different investors when choosing one or another market , avoiding risking more than recommended and being able to prevent dire consequences on their finances. individuals.