8/12/2019 International Flow of Funds Chapter 2

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International Flow of Funds

Overview

International business is facilitated by markets that allow for the flow of funds betweencountries. The transactions arising from international business cause money flows from onecountry to another. The balance of payments is a measure of international money flows.

Financial managersof MNCs monitor the balance of payments so that they can determinehow the flow of international transactions is changing over time. The balance ofpayments can indicate the volume of transactions between specific countries and may evensignal potential shifts in specific exchange rates.

The specific objectives of this chapter are to:

explain the key componentsof the balance of payments,explain how international trade flows are influenced by economic factorsand otherfactors, and

explain how international capital flows are influenced by country characteristics .Key Points to Discussed:

Balance of Payments International Trade Flows Factors Affecting International Trade Flows Correcting a Balance of Trade Deficit International Capital Flows

Agencies that Facilitate International Flows How International Trade Affects an MNCs Value