INTERNATIONAL FINANCE

İbrahim Emre Karaa (Ph.D)

 What is the economic nature of the
international finance?
International finance is defined as the set of relations for
the creation and using of funds (assets), needed for foreign
economic activity of international companies and
countries.
finance is the monetary capital, money flow, serving the
circulation of capital.
the combination of monetary relations, that develop in
process of economic agreements - trade, foreign exchange,
investment - between residents of the country and
residents of foreign countries.
 External
environment of the international business
Effect on activity in practice.
Intfin is in relation with the international finance actions
and the set of temporary and spatial risk factors(currency,
credit, investment, political) caused by uncertainty and
fluctuations in exchange rates of securities, the
comparative difference in inflation and interest rates in
different countries, the uncertainty of the economic policy
of the country..
 International finance represents…
International finance is one of the main subsystems of the
world economy, which makes a decisive impact on the
national and global economy. At the same time, the
international finance functions as an integral system,
whose elements are:
The main functions of international finance
Distribution function. Its essence is that through the
mechanism of international finance the cash
distribution and redistribution of world product are
carried out. Due to the international finance cash funds
are created, distributed and used, and different needs of
the world economy are met.
The main functions of international finance
Control function. Its general essence is the monitoring the
production and distribution of world social product in
money form by recording and analyzing its movement. The
result of this function is making decisions on international
finance and development of current and strategy
international financial policy;
Regulatory function is associated with the intervention of
international monetary and financial institutions with the
help of finance in the process of production;
Stabilizing function. Its essence is to create stable conditions
for economic and social relations in the global economic
system.
The competences of international finance
analysis of the financial sphere on a global scale;
determination of the interaction of financial
transactions on a global level and consideration the
international financial transactions as a continuous
process with regular changes;
the development of new financial methods, that affect
the regional financial systems and facilitate theirs
integration;
the analysis of financial activities at different levels:
national, regional, global.
International finance contributes to the
internationalization of socialeconomic and monetary
relations on the accumulation, distribution and
redistribution of internationalized financial resources
and international financial flows.
What is meant by international financial
flows?
There is always movement of capital from one country to
another in the global economy, creating global financial
flows.
International financial flows are the set of financial
transactions. The subject of these transactions is the money
capital. These flows serve international trade in goods and
services, and capital reallocation between countries.
Financial flows contribute to the expansion of the types of
currency transactions, foreign investment, activation of
securities transactions and other financial instruments,
providing international redistribution of financial resources.
What is meant by international financial
flows?
monetary and credit and settlement services of sale of
goods and services;
foreign investment in fixed and working (floating)
capital (FDI);
transactions with securities and different financial
instruments;
currency transactions;
assistance to developing countries, and state
contributions to international organizations.
 The volume and directions of financial flows
depend on various factors
1) the condition of the global economy
2)the reduction of trade barriers
3) different rates of economic development of the countries (synchrony or
asynchrony in the major countries’ economies);
4) the restructuring of the country's economy
5) the differential gap of inflation’s rate and the level of interest rates
between the countries;
6) the faster increase of international capital flows comparatively to the
international trade. It affects sizes of international financial markets;
7) the transition of industrialized countries from labor-intensive to high-tech
production;
8) growth of the diversification of TNCs activities, including international
investments in joint ventures;
9) the increase of balance of payments’ deficits due to the imbalance of
international payments.
 The choice of TNC’s financing sources is influenced by the following factors:

 the need for maintaining or strengthening the control over

subsidiaries;
 need to obtain regular financial resources inflows from
affiliates;
 selection of financing objects (fixed or working capital);
 the desire to minimize the amount of all taxes paid worldwide;
 business contacts with national and international financial
institutions;
 the changes in interest rates, exchange rates and other financial
costs that
TNC can consider as a source of financing;
 the desire to minimize the monetary, financial and political
risks.
 What is the essence of the world financial
market?
The world financial market is traditionally divided into the
international foreign exchange markets, international debt
markets, international securities markets, each of which
includes Euromarkets (the markets of euro deposits, the
markets of euro credits, the markets of euro shares, the
markets of euro bonds and euro bills).
There is another model of the financial market, when
according to the criterion "the terms of realization of
property rights" the financial market is divided into the
money market (short-term obligations, which have high
liquidity) and capital market or the stock market (long terms
of securities’ sale).
The simplified structure and interconnection
of international financial market
What are the main tendencies in the world
financial market?
1. Creation of currency unions around the major
currencies.[trade, financial, economic, political]
2. The structure of financial market instruments changes
in favor of the real instruments sector - corporate
securities and their derivatives.
3. Stock markets are the key structure-creation factors of
the financial sector.
4. The growth of the relationship between finance and
the real sectors of economy.
 What are the main tendencies in the world
financial market?
5. The scale’s growth of technological upgrading of the
financial markets based on internet technologies that erase
the national boundaries
6. Changes in the ideology of the activities of international
financial institutions.
7. The sharp increase and dominance of speculative
operations in world financial markets. The speculative
operations constitute over 95% of all the financial
transactions.