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1. Topic : Un it -1 International Monetary & Finance System Subject Code : MMBA22E13 Subject Name : International Financial Management Delivered by : Ms.P.Sowmiya

2. International Financial Management (IFM) International Financial Management (IFM) refers to the process of managing finance in a business environment that crosses national borders. It involves financial activities like investment, funding, and risk management, but in an international context where factors like exchange rates, foreign regulations, political risk, and different economic environments must be considered.

3. Facilitates Global Trade and Investment Manages Foreign Exchange Risk Provides Access to Larger Capital Markets Enhances Economic Development Diversifies Investment Opportunities(FDI) Promotes Financial Stability Supports Multinational Corporations (MNCs) Encourages Competitive Markets Importance of International Finance

4. July 1944, in Bretton Woods, New Hampshire, USA. To create a new international monetary and financial order after World War II, to avoid the chaos (like the Great Depression and trade wars) that happened after World War I.(44 NATIONS) The U.S. ended the direct convertibility of dollars into gold . Key Outcomes : Establishment of two major institutions: Creation of International Monetary Fund (IMF) World Bank Creation of a new currency system Bretton Woods Conference

5. Immediate Outcomes: The world entered a period of economic stability and growth (often called the " Golden Age of Capitalism " from 1945 to the early 1970s). Europe and Japan rebuilt quickly with help from U.S. funding and international loans (e.g., the Marshall Plan ). International trade and investment expanded rapidly. Aftermath of Bretton Woods (1945–1971)

6. The European Monetary System (EMS) was a system introduced in 1979 by European countries to stabilize exchange rates, control inflation, and prepare for closer economic integration. It was an important step toward creating the euro and the European Economic and Monetary Union (EMU) . Main Features of the EMS : Exchange Rate Mechanism (ERM) European Currency Unit (ECU) Monetary Support European Monetary System (EMS)

7. To avoid wide fluctuations in exchange rates like those seen after the collapse of the Bretton Woods system. To promote economic stability and growth among European countries. To prepare for deeper economic integration and eventually create a single European currency . EMS created:

8. Exchange Rate Stability Monetary Cooperation Creation of a Common Monetary Reference Financial Assistance Preparation for Deeper Integration Economic Policy Coordination Scope of the European Monetary System (EMS)

9. The Balance of Payments ( BoP ) is a record of all economic transactions between the residents of a country and the rest of the world over a period of time (usually one year). It shows how money flows into and out of a country through trade , investments , loans , aid , etc. BoP = Money coming in – Money going out Balance of Payments:

10. International linkages refer to the connections between economies through: Trade of goods and services (exports and imports) Investment flows (foreign direct investment, stock markets) Capital flows (borrowing and lending) Labor flows (migration of workers) Technology and information sharing International Linkages

11. Current Account : Records trade in goods and services, income from investments, and transfer payments (like remittances, gifts, foreign aid). Capital Account : Records transfer of ownership of assets like debt forgiveness, sales of patents, or transfer of financial assets. (Usually small compared to the other two.) Financial Account : Records investment flows — direct investments (factories, companies), portfolio investments (stocks, bonds), and reserve assets (foreign exchange reserves). Components of Balance of Payments:

12. Goods = Products Services = Intangible help (like IT, banking) Capital = Money and investments Flow of Goods Goods are physical products that are exported (sold abroad) or imported (bought from abroad). Examples: Export: India exports textiles to the USA. Import: India imports crude oil from Saudi Arabia. . International Flow of Goods, Services, and Capital

13. Flow of Services Services are intangible products (not physical) that are sold internationally. Examples: IT services, banking, tourism, education, insurance, consulting. For example, an Indian software company providing services to a company in Europe. Flow of Capital Capital refers to money and financial assets moving between countries. Capital flows happen for investment, borrowing, lending, or savings.