While the world economy gets further integrated globally, small firms and individual economists are getting absorbed by the global economic developments. In order to stay on track with these changes, business people need to adopt the world's standard financial methods. Therefore, it is necessary for financial managers to venture into the global financial market to facilitate the accessibility of lower-cost financing alternatives. The most significant aspect and the difference between international and domestic finance is the exposure to foreign currency (Eun & Resnick, 2010). Hence, the reading offered valuable lessons on the international monetary system, modes of payments, and balance of payment (BoP).
The international monetary system is an operating technique for facilitating business between the global financial environment. It encompasses financial institutions, multinational corporations, and investments. The monetary systems have evolved in the past years from domestic to international systems facilitating global trade. In the nineteenth century, the monetary systems have significantly provided a mutual shift from national monetary and credit policies, creating stable exchange rates (Eichengreen, 2019). Modes of payments have changed from the ancient barter trade to currency convertibility to treasure standard. Treasure banks have emerged whereby people are doing transactions using precious stones like golds and diamonds, which are much efficient for most valuable commodities. The European Monetary Union (EMU) is a multinational organization the generates a common unit currency for many European countries to acquire easy currency exchanges. It is a treaty that aims at creating a strict criterion for euro conversion using the GDP comparison of European countries.
Delegate your assignment to our experts and they will do the rest.
The balance of payments allows balanced exportation and importation. In a perfect economy, the BoP should be zero; money coming in or out should balance out. However, this does not happen on most occasions; thus, a balance of payment is necessary for a country to determine whether they have surplus funds or a deficit (Minsky, 2019). When the BoP is surplus, exportation exceeds importation. When the BoP is a deficit, importation exceeds exportation. A country that retains BoP surplus experiences higher currency value. Therefore, nations must control their "economic house in order" to avoid account deficits, which would undermine the value of their currency.
References
Eun, C. S., & Resnick, B. G. (2010). International Financial Mgmt 4E . Tata McGraw-Hill Education.
Eichengreen, B. (2019). Globalizing Capital: A History of the International Monetary System . Princeton University Press.
Minsky, H. P. (2019). Financial interrelations, the balance of payments, and the dollar crisis. In Debt and the Less Developed Countries (pp. 103-122). Routledge.
