International finance
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, 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.
Some examples of
key concepts within international finance are the Mundell–Fleming model, the optimum currency area theory, purchasing power parity, interest rate parity, and the international Fisher effect. Whereas the study of international trade makes use of mostly microeconomic concepts,
international finance research investigates predominantly macroeconomic concepts.