THE HISTORY AND THE SCOPE OF GLOBAL FINANCE

When it comes to understanding what global finance is, it is basically the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. As it examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investments, and how these elements relate to international trade, the global finance is sometimes referred to as multinational finance which is additionally concerned with the matters of international financial management. Therefore, both investors and multinational corporations in any cases must assess and manage some of the international risks involved such as political risk, transaction and foreign exchange risk, also economic and translation exposure.

To start off the above topic, it is necessary to have a quick grasp of international financial management so that we can get a better overview of what global finance is all about. By definition, international financial management is a term that grew out of the need for individuals and organizations to consider the implications of financial decisions due to numerous cross-border transactions, which are prevalently occurred or commonly executed in the world economy as of today. Such a decision-making in international financial management must account for potential impacts related to various capital structures, approaches to risk management, and how to best leverage taxation systems.

Currency exchange rates and differing methods to determine price of assets in addition can have a major impact on the bottom line in international financial management. As such, the topic accounts for the structure of the currency exchange system and how to determine asset prices in a global setting is practically concerned with how different currencies impact the prices on stock markets. Overall, the main goal of international financial management is to create the most possible amount of wealth for shareholders and this includes suppliers, vendors, employees and end customers who all must be observed from financial perspectives when considering any cross-border transactions.

Historically, the GATT (General Agreement on Tariffs and Trade) which was signed in 1947 by approximately 23 countries was a treaty aimed to minimize barriers to international trade by eliminating or reducing quotas, tariffs, and subsidies. This treaty at the beginning of its establishment was intended to boost economic recovery after World War II. Due to the fact that the GATT mostly dealt with trade in goods or tangible products, the creation of World Trade Organization or known as "WTO" by its acronym on January 1^st 1995 marked the biggest reform of the aforementioned treaty which covers trade in services and intellectual property. As a result, the financial participation of both exporters and importers along with the myriads of international transactions flowed significantly since the establishment of WTO (World Trade Organization).

On the other hand, proper management of international finances can help an organization or institution in achieving same efficiency and effectiveness in all markets. And of course, there are reasons as to why companies would like to invest capital in overseas markets such as the efficiency of production cost, the opportunity to broaden markets and diversify business units, the possibility of earning higher returns, and so on. Thus, below here is the scope of global finance which can be conceptually distinct but identifiable.

1. International Financial Economics: It is concerned with causes and effects of financial flows among nations, application of macroeconomic theory and policy to the global economy.

2. International Financial Management: It is concerned with how individual economic units, especially Multinational Corporations (MNCs) coping with the complex financial environment of international business.

3. International Financial Markets: It is concerned with international financial instruments such as Foreign Direct Investment (FDI), foreign exchange markets, international banking, international securities markets, financial derivatives, and so forth.