ROLE OF MONEY IN INTERNATIONAL TRANSACTION
Money plays an important role in international transactions. Both internal and external trades are similar because both are transacted use of money. However, they still differ in many ways. In internal trade, buyers and seller use
the same currency and so no currency problems arise. In foreign trade, however, this is case. Countries have different currencies thus, it becomes necessary to change one another for trade to take place. Money also acts as a unit of measurement in which of transactions are kept. Just as individuals firms keep records of their sales and purchases in order to know whether or not they are making profit.
Countries also keep records of the money they spend on imports and the money they earn from exports in order to know whether international trade has been profitable or not in period. This kind of record-keep, which is done by countries in units of money, is precisely what balance of payments is all about.
Money also useful in international transactions when involves foreign exchange market. All exchanges that take place between the residents of one country and another require the use of money.
Foreign exchange market came into existence as a result of the need to resolve the differences between one
country ‘ s currency and that of another.
Money also facilitates economic development by means of foreign exchange, foreign capital and skills are being imported, thereby assisting the development process of the under-developed.