International finance (also referred to as international monetary economics or international macroeconomics) is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries.International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade. Sometimes referred to as multinational finance, international finance is additionally concerned with matters of international financial management. Investors and multinational corporations must assess and manage international risks such as political risk and foreign exchange risk, including transaction exposure, economic exposure, and translation exposure.Whereas the study of international trade makes use of mostly microeconomic concepts, international finance research investigates predominantly macroeconomic concepts.
What are Key differences between International Finance and International Trade?
The study of the flow of monetary payments and the exchange of currencies among nations undertaken as a necessary complement to the international trading of goods and services. The exchange of currencies takes place through the foreign exchange market, which determines the foreign exchange rate, or exchange rate or one currency for another. The balance of payments documents the flow of currency payments into and out of a given country. A related area of study is international trade, both of which are part of the broader study of international economics.
International finance is concerned with the "paper" or financial side of the global economy. Whereas international trade is the study of the flow of physical goods and services among nations, international finance is the study of the corresponding monetary flow used to pay for the physical trade.Goods and services flow in one direction and monetary payments flow in the other.The flow of monetary payments associated with international trade is an important part of international finance, but only part. International finance is a comprehensive study of all monetary payments among countries, including capital investment and transfer payments. This is captured by an accounting tabulation termed the balance of payments.The cornerstone of international finance is the exchange of currencies through what is termed the foreign exchange market. Because each nation has its own domestic currency the flow of monetary payments among nations requires the exchange of domestic currencies used by the nations. The purchase of a Japanese automobile in the United States, for example, requires the exchange of U.S. dollars for Japanese yen.
The study of international finance is intertwined with the study of international trade. international trade is the flow of goods and services among nations. Goods and services produced in one country are purchased by citizens of another country.From the perspective of the domestic sector of a given nation, international trade is also termed foreign trade. Exports are sold by domestic producers to buyers in the foreign sector and imports are purchased by domestic buyers from producers in the foreign sector. The difference between exports and imports is termed net exports.Net exports, once again from the perspective of the domestic sector of a nation, are also tabulated as the balance of trade. The balance of trade is in surplus if net exports are positive and exports exceed imports. Alternatively, the balance of trade is in deficit if net exports are negative and imports exceed exports.The guiding principle for international trade is the law of comparative advantage. This law states that every nation has a production activity that incurs a lower opportunity cost than that of another nation, which means that trade between the two nations can be beneficial to both if each specializes in the production of a good with lower relative opportunity cost.International trade, as such, generates gains to both buyers and sellers in the form of consumer surplus and producer surplus, comparable to any market exchange. The key difference is that buyers and sellers are citizens of different countries. However, because buyers and sellers reside in different countries, which use different domestic currencies, a corresponding exchange of currencies is also required.
Financial accountants are vital to all businesses, since they keep track of business activities and transactions. Companies are required by law to keep a record of their accounts and abide by certain accounting principles. American companies operate by a set of rules known as the Generally Accepted Accounting Principles, set forth by the Financial Accounting Standards Board. Other international corporations operate under a different set of accounting rules known as International Accounting Standards. Accountants are important and necessary for any business and familiarity and certification with both domestic and international rules can broaden opportunities around the globe.
The consulting industry has grown dramatically in recent years. Firms of all sizes have opened operations not just in the US but across the globe. Consultants generally are hired by firms to form teams and work on projects that last from several weeks to months. Companies hire consultants to streamline operations, create better management strategies, and generally improve business efficiency and effectiveness. Travel is a major aspect of consulting, and large firms frequently take on international clients.
Investment banking can be a lucrative and prestigious career choice in the business world, but it also demands much from those that work in the industry. Investment bankers enable securities, stock, and bond transactions, often for large, multi-national corporations. They also work to provide financial advisement and information for large companies and high net-worth individual investors. Though long hours, traveling, and a large number of meetings are involved in this field, many investment bankers enjoy the prestige, compensation, and challenge this job provides.
Venture Capitalist/Private Equity
Venture capitalists work to invest in start-up companies that are experiencing high levels of growth and expansion. Small start-ups seeking funding will approach venture capital firms with proposals and business plans. Venture capitalists must appraise the company and if they feel comfortable and confident in the company’s future, they will invest money and resources. There is some risk involved for investors, since many start-ups do not realize their potential, but those that are successful can provide solid returns on the initial investment. Start-ups are located throughout the globe, so large firms must be willing to research, meet, and invest with companies all over the world.
Financial Analyst- Corporate Finance
Financial analysts are tasked with the important job of collecting, analyzing, synthesizing, and presenting data regarding possible investment opportunities, competitors, and internal operations. This role is important to management operations as it informs and advises suggestions as to appropriate courses of action within a company. Both domestic and international companies require financial analysts to provide data, and so traveling may be required when working for a large international corporation.
International finance continues to provide a number of career paths within the business world. As companies of all sizes continue to expand across the globe, the need for skilled and capable employees rises. Careers in international finance can present challenges, but they can also provide opportunities for immense professional growth and advancement.
International Trade Theory
International Trade Settlement
Foreign Trade Negotiation Skills
International Economic Cooperation
Multinational Company Theory and Practice
Introduction to World Economics
Common skills gained from this degree
- Analyze and mitigate economic and currency risks
- Manage existing strategic alliances or partnerships
- Conduct the entire gamut of international transactions
- Manage cash flow
- Conduct all business according to policies and procedures to meet legal and ethical requirements