Lecture Class_5_government And Exchange Rate
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Lecture Class_5_government And Exchange Rate as PDF for free.
More details
- Words: 411
- Pages: 13
Module 1 Session 5: Government Influence on Exchange Rates
Session Overview A. Exchange Rate Systems B. Government Intervention C. Intervention as a Policy Tool
Session Objectives A. Describe the exchange rate system used by various governments B. Explain how governments can use direct intervention to influence exchange rates C. Explain how governments can use indirect intervention to influence exchange rates D. Explain how government intervention in the foreign exchange market can affect economic conditions
A. Exchange Rate Systems 1. Fixed Exchange Rate System a. Bretton woods Agreement b. Smithsonian Agreement c. Advantages of a Fixed Exchange Rate System d. Disadvantages of a Fixed Exchange Rate System
A. Exchange Rate Systems 2. Freely Floating Exchange Rate System a. Advantages of a Freely Floating Exchange Rate System 1.) a country is more insulated from the inflation of other countries 2.) a country is more insulated from unemployment problems in other countries b. Disadvantages of a Freely Floating Exchange Rate System can adversely affect a country that has high unemployment.
A. Exchange Rate Systems 3. Managed Float Exchange Rate System a. Criticism of a Managed Float System
A. Exchange Rate Systems 4. Pegged Exchange Rate System a. Limitations of a Pegged System b. Creation of Europe’s Snake Arrangement c. Creation of the European Monetary System (EMS) d. Demise of the European Monetary System
A. Exchange Rate Systems 5. Currency Boards a. Exposure of a Pegged Currency to Interest Rate Movements b. Exposure of a Pegged Currency to Exchange Rate Movements
A. Exchange Rate Systems 6. Dollarization a. the replacement of a foreign currency withU.S. dollars. b. This process is a step beyond a currency board because it forces the local currency to be replaced by the U.S. dollar. c. Although dollarization and a currency board both attempt to peg the local currency’s value, the currency board does not replace the local currency with dollars.
7. Classification of Exchange Rate
Arrangements
C. Government Intervention 1. Reasons for Government Intervention a. Smooth Exchange Rate Movements b. Establish Implicit Exchange Rate boundaries c. Respond to Temporary Disturbances
Effects of Direct Central Bank Intervention in the Foreign Exchange Market
Exhibit 6.2
C. Government Intervention 2. Direct Intervention a. Reliance on Reserves b. Speculating on Direct Intervention 3. Indirect Intervention a. Government Adjustment of Interest Rates b. Government Use of Foreign Exchange Controls
D. Intervention as a Policy Tool 1. Influence of a Weak Home Currency on the Economy 2. Influence of a Strong Home Currency on the Economy
Session Overview A. Exchange Rate Systems B. Government Intervention C. Intervention as a Policy Tool
Session Objectives A. Describe the exchange rate system used by various governments B. Explain how governments can use direct intervention to influence exchange rates C. Explain how governments can use indirect intervention to influence exchange rates D. Explain how government intervention in the foreign exchange market can affect economic conditions
A. Exchange Rate Systems 1. Fixed Exchange Rate System a. Bretton woods Agreement b. Smithsonian Agreement c. Advantages of a Fixed Exchange Rate System d. Disadvantages of a Fixed Exchange Rate System
A. Exchange Rate Systems 2. Freely Floating Exchange Rate System a. Advantages of a Freely Floating Exchange Rate System 1.) a country is more insulated from the inflation of other countries 2.) a country is more insulated from unemployment problems in other countries b. Disadvantages of a Freely Floating Exchange Rate System can adversely affect a country that has high unemployment.
A. Exchange Rate Systems 3. Managed Float Exchange Rate System a. Criticism of a Managed Float System
A. Exchange Rate Systems 4. Pegged Exchange Rate System a. Limitations of a Pegged System b. Creation of Europe’s Snake Arrangement c. Creation of the European Monetary System (EMS) d. Demise of the European Monetary System
A. Exchange Rate Systems 5. Currency Boards a. Exposure of a Pegged Currency to Interest Rate Movements b. Exposure of a Pegged Currency to Exchange Rate Movements
A. Exchange Rate Systems 6. Dollarization a. the replacement of a foreign currency withU.S. dollars. b. This process is a step beyond a currency board because it forces the local currency to be replaced by the U.S. dollar. c. Although dollarization and a currency board both attempt to peg the local currency’s value, the currency board does not replace the local currency with dollars.
7. Classification of Exchange Rate
Arrangements
C. Government Intervention 1. Reasons for Government Intervention a. Smooth Exchange Rate Movements b. Establish Implicit Exchange Rate boundaries c. Respond to Temporary Disturbances
Effects of Direct Central Bank Intervention in the Foreign Exchange Market
Exhibit 6.2
C. Government Intervention 2. Direct Intervention a. Reliance on Reserves b. Speculating on Direct Intervention 3. Indirect Intervention a. Government Adjustment of Interest Rates b. Government Use of Foreign Exchange Controls
D. Intervention as a Policy Tool 1. Influence of a Weak Home Currency on the Economy 2. Influence of a Strong Home Currency on the Economy
Related Documents
Lecture Class_5_government And Exchange Rate
July 2020 3
Exchange Rate
November 2019 46
Foreign Trade And Exchange Rate
April 2020 4
Fixed And Floating Exchange Rate.
May 2020 1
Exchange Rate Determination
May 2020 15