The concept of international liquidity is associated with international payments.

These payments arise out of

international trade in goods and services and also in connection with capital movements between one country
and another. International liquidity refers to the generally accepted official means of settling imbalances in
international payments.
In other words, the term 'international liquidity' embraces all those assets which are internationally acceptable
without loss of value in discharge of debts (on external accounts).
In its simplest form, international liquidity comprises of all reserves that are available to the monetary authorities
of different countries for meeting their international disbursement. In short, the term 'international liquidity'
connotes the world supply of reserves of gold and currencies which are freely usable internationally, such as
dollars and sterling, plus facilities for borrowing these. Thus, international liquidity comprises two elements, viz.,
owned reserves and borrowing facilities.
Under the present international monetary order, among the member countries of the IMF, the chief components
of international liquidity structure are taken to be:
1. Gold reserves with the national monetary authorities - central banks and with the IMF.
2. Dollar reserves of countries other than the U.S.A.
3. -Sterling reserves of countries other than U.K.
It should be noted that items (2) and (3) are regarded as 'key currencies' of the world and their reserves held by
member countries constitute the respective liabilities of the U.S. and U.K. More recently Swiss francs and German
marks also have been regarded as 'key currencies.
4. IMF tranche position which represents the 'drawing potential' of the IMF members; and
5. Credit arrangements (bilateral and multilateral credit) between countries such as 'swap agreements' and the
'Ten' of the Paris Club.
Of all these components, however gold and key currencies like dollar today entail greater significance in
determining the international liquidity of the world.
However, it is difficult to measure international liquidity and assess its adequacy. This depends on gold and the
foreign exchange holdings of a country, and also on the country's ability to borrow from other countries and from
international organisations. Thus, it is not easy to determine the adequacy of international liquidity whose
composition is heterogeneous.
Moreover, there is no exact relationship between the volume of international transactions and the amount of
necessary reserves In fact, foreign exchange reserves (international liquidity) are necessary to finance imbalances
between international receipts and payments. International liquidity is needed to service the regular How of
payments among countries, to finance the shortfall when any particular country's out payments temporarily
exceed its in-payments, and to meet large withdrawals caused by outflows of capital.
Thus, external or internal liquidity serves the same purpose as domestic liquidity, viz., to provide a medium of
exchange and a store of value. And the primary function of external liquidity is to meet short-term fluctuations in
the balance of payments.

Refers to the adequacy of a country's, or the world's, international reserves. Under the Bretton
Woods System, liquidity was a problem, since it depended on US dollars and thus a US
deficit. The SDR was an attempt to fix this.

International liquidity is the part of the concept of international finance. International

liquidity is foreign currency or gold in the reserve of any country. It is very useful to pay
the amount of imported goods and reduce balance of payment deficit. Every country
should increase exports for reducing international liquidity shortage. At micro level, you
can understand international liquidity as cash in your pocket for operation of business. If
you have building, furniture, plant, equipments and stock but no cash in pocket, you can
not survive long term in your business. Just like this, any nation may have lots of natural

resources in the form of land, mines and forest but for dealing with foreign country, that
nation should have foreign currency in hand.

http://www.svtuition.org/2011/05/what-is-meaning-of-international.html

International liquidity measures a country's ability to make good on its debts in the short-term.
Jeffrey Chwieroth of the London School of Economics defines it as the total value of all gold, foreign
cash reserves and available international credit held by a country
International liquidity is important to consider when investing in a foreign country because it
indicates how safe your investment is. A country with high international liquidity has plenty of
liquid assets, which means it has the cash on hand to pay its debts quickly and easily. A country
with less international liquidity may have plenty of assets, but ones which cannot be used to
quickly pay off debts, such as natural resources.

t used to be that the term international liquidity meant the relative

amount of resources available to a nations monetary authorities that
could be used to settle a balance of payments deficit.
In the days of the gold standard, this would mean access to gold that
could be used to redeem a nations currency held by foreigners.
After Bretton Woods and the advent of the dollar-gold exchange standard,
liquidity came to mean access to dollars, either held as reserves or as
credit lines, or the SDR system maintained by the International Monetary
Fund.

Hotel Mount Washington, Bretton Woods, 1944

After 1971, with the abandonment of the dollar-gold exchange standard,
as the world entered an era of managed exchange rates, some floating,
some pegged, international liquidity came to mean the resources
available to national monetary authorities to maintain the value of their
currencies as required by their exchange management programs.

Liquidity in a post-gold-standard world

After the Asian financial crises of 1997, it became clear that with

globalization and open economies, national monetary authorities often no

longer had even nominal control over their exchange rates.

The international currency is determined by exporters

As countries abandoned the licensing of imports, exports, and
international credit and investment operations, control of foreign
exchange assets passed to the private sector.
For countries operating without exchange licensing, the access to
resources needed to settle a balance of payments deficit, no longer were
managed by central banks, but were controlled by private businesses and
individuals.
Under liberal trading systems, central banks often do not even have a way
to accurately measure foreign exchange assets controlled by private
citizens, much less the ability to determine the access of the private
sector to international lines of credit.

Individualized balance of payments

Today, the international reserves of a national central bank is often less

important than the credit and reserves available to residents of that
country that permit them to import goods whatever the reserve position
of the monetary authorities.
If a country is not trying to peg its exchange rate to a specific foreign
currency, the aggregate trade deficit of that country is not necessarily
relevant to an individual businessperson who controls his or her own
assets and credit.

International liquidity: a fuzzy concept

The term, international liquidity sometimes retains the older meaning,

related to the foreign currency assets of the monetary authority, for
countries that manage exchange rates and exercise various degrees of
direct control over international transactions of residents.

An anonymous crowd of millions of individuals determine international

liquidity
However, for countries with free trading regimes and floating exchange
rates, international liquidity may more properly be thought of as the
foreign exchange assets and credit available to residents of a country that
would allow them to import from abroad at their discretion.
Todays international economy is supported by monetary authorities with
varying degree of control over their nations balance of payments and
foreign currency reserves.
Consequently, the meaning of international liquidity is somewhat vague,
relative to the particular foreign exchange policies of a specific country.

http://www.capital-flow-watch.net/2006/02/19/what-is-international-liquidity/