Define International Liquidity

Interior of bank vault containing stacks of gold bars
Interior of bank vault containing stacks of gold bars (Image: tvildanov/iStock/Getty Images)

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

The Importance

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.

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