International Flow of Funds

Overview
International business is facilitated by markets that allow for the flow of funds between countries. The transactions arising from international business cause money flows from one country to another. The balance of payments is a measure of international money flows. Financial managers of MNCs monitor the balance of payments so that they can determine how the flow of international transactions is changing over time. The balance of payments can indicate the volume of transactions between specific countries and may even signal potential shifts in specific exchange rates. The specific objectives of this chapter are to: explain the key components of the balance of payments, explain how international trade flows are influenced by economic factors and other factors, 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