International finance

International finance

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Encyclopedia
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, global financial system
Global financial system
The global financial system is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level...

, and how these affect international trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

. It also studies international projects, international investments and capital flows, and trade deficits. It includes the study of futures, options and currency swaps. International finance is a branch of international economics
International economics
International economics is concerned with the effects upon economic activity of international differences in productive resources and consumer preferences and the institutions that affect them...

.

Important theories in international finance include the Mundell-Fleming model
Mundell-Fleming model
The Mundell–Fleming model, also known as the IS-LM-BP model, is an economic model first set forth by Robert Mundell and Marcus Fleming. The model is an extension of the IS-LM model...

, the optimum currency area
Optimum currency area
In economics, an optimum currency area , also known as an optimal currency region , is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency. It describes the optimal characteristics for the merger of currencies or the creation of a...

 (OCA) theory, as well as the purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

 (PPP) theory. Whereas international trade theory makes use of mostly microeconomic methods and theories, international finance theory makes use of predominantly macroeconomic methods and concepts.

See also

  • Global financial system
    Global financial system
    The global financial system is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level...

  • International Finance Corporation
    International Finance Corporation
    The International Finance Corporation promotes sustainable private sector investment in developing countries.IFC is a member of the World Bank Group and is headquartered in Washington, D.C., United States....

  • International Monetary Fund
    International Monetary Fund
    The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

  • Interest rate parity
    Interest rate parity
    Interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries. Two assumptions central to interest rate parity are capital mobility and perfect substitutability of domestic...

  • World Bank
    World Bank
    The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

  • Double taxation
    Double taxation
    Double taxation is the systematic imposition of two or more taxes on the same income , asset , or financial transaction . It refers to taxation by two or more countries of the same income, asset or transaction, for example income paid by an entity of one country to a resident of a different country...


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