International finance

As the name suggests, the field of financial economics known as international finance deals primarily with the monetary and macroeconomic interrelationships between nations. The dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these themes relate to international commerce are examined in international finance.

International finance is often known as multinational finance because of its focus on global financial management. Foreign currency risk, transaction exposure, economic exposure, and translation exposure must all be assessed and managed by investors and multinational organisations.

The Mundell–Fleming model, the optimal currency area theory, purchasing power parity, interest rate parity, and the international Fisher effect are all examples of important ideas in international finance. International finance research focuses mostly on macroeconomic principles, while international commerce research focuses more on microeconomics.

Sovereign states have the right and ability to issue their own currencies, create their own economic policies, levy taxes, and restrict the movement of people, commodities, and money across their borders.