Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Exchange Rate Regimes - Essay Example

Comments (0) Cite this document
The ultimate purpose of economics is to increase economic welfare. So far we've concentrated on the optimal allocation of a given bundle of resources, but it's obvious that welfare may also be improved either by increasing the quantity of resources available or by learning to do more with a given bundle. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.7% of users find it useful
Exchange Rate Regimes
Read TextPreview

Extract of sample "Exchange Rate Regimes"

Download file to see previous pages The impact of the inherent volatility and unpredictability of exchange rates on macroeconomic conditions is central to the debate about fixed and flexible exchange rates. Real exchange rates are defined as nominal rates adjusted for price levels. Since prices for individual countries, when expressed in a common currency, are subject to the variability of exchange rates, bilateral real exchange rates based on individual-country price levels may be infected with measurement errors. The use of one reference country, such as the USA, gives rise to asymmetries.
By definition, the exchange rate is a relative price of two assets and, like other asset prices, is determined in a forward-looking manner in which expectations concerning the future course of events play a key role. Consequently, exchange rates are very sensitive to the receipt of new information.
The large and sustained changes in nominal and real exchange rates were among the most significant developments in the world economy in the 1980s. For example, in the first half of the decade, the US dollar appreciated by about 40 per cent against most other major currencies and then, in the second half of the decade, declined, reversing all the previous appreciation. These changes gave rise to international pressures associated with rapidly changing competitiveness of exports; intervention by central banks in foreign exchange markets; and intense debate regarding the extent to which these exchange rate changes interact with current account imbalances. Some economists feel that conventional measures of economic growth based on the output of goods and services (gross national product) do not satisfactorily reflect economic welfare, arguing that they ignore factors such as pollution and the negative externalities from congestion. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Exchange Rate Regimes Essay Example | Topics and Well Written Essays - 2250 words”, n.d.)
Retrieved from
(Exchange Rate Regimes Essay Example | Topics and Well Written Essays - 2250 Words)
“Exchange Rate Regimes Essay Example | Topics and Well Written Essays - 2250 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Exchange Rate Regimes

Determination of Exchange Rate

The initial period was 1870 to 1914 where most countries adopted the gold standard where gold was used as domestic money. The above gold standard was a uniform exchange rate regime, though some countries constantly used silver while other countries gold inconvertible currencies (Ehrmann and Fratscher, 2004, p. 105). The start of the First World War interrupted this exchange rate era thereby bringing in the second phase that was 1914-1946. Under this second period, there were many changes as many countries saw great variations of currencies used among countries and the over time. Exchange controls were initiated with most countries utilizing the floating exchange rates (Escobar, 2012). It was noted that in the late 1920s, the effo...
16 Pages(4000 words)Coursework

Exchange Rate Considerations- DB4

... and sustainable economic growth (Mankiw, 2007). Through constant market transactions, the central banks influence the supply of money and this affects other market variables such as short term interest rates and the exchange rate. A stable money supply plays a crucial role in economic growth. Excessive circulation of currency results in inflation while an insufficient circulation of currency makes it more difficult for consumers and firms to obtain credit to finance large purchases and business expansions. Given that the United States, the European Union, and Japan are the world richest economies as at the time of the ranking, Ben Bernanke, Jean-Claude Trichet, and Masaaki Shirakawa have considerable influence on the stability and growth...
2 Pages(500 words)Essay

Exchange Rate Considerations- IP4

The decision of what payment method to use solely depends on what the U.S. based company think its best interests are. There are many advantages of only accepting payments in U.S. dollars for a domestic company; it all depends on what the value of the dollar is versus the other currency. For example (Umflint): In the case of weak dollar vs. strong foreign currency- It helps lower the price of goods exported to foreign markets, therefore it will tend to increase the demand for U.S. manufactured goods and services. Additionally it will help increase domestic tourism since it will lower the cost of travel and increase the tourist’s expenditure in local goods and services. On the other hand it will increase the cost of importing good...
5 Pages(1250 words)Essay

Floating and Fixed Exchange Rate Regimes

...Running Head: FLOATING AGAINST FIXED EXCHANGE RATE REGIME Floating Against Fixed Exchange Rate Regime of Institution] Floating against Fixed Exchange Rate Regime using the Mundell-Fleming and the Dornbusch Models Introduction As part of the financial improvement and stabilization programs, a lot of Latin American countries in the history decade adopted a variety of forms of fixed exchange rate regimes and opened their assets account. The fixed exchange rate machine is used as a supposed fastens to manage chronically price rises and the freedom of possessions mobility is permissible to endorse economic growth. These schemes have achieved at least some achievement as numerous countries in the area have experienced financial...
4 Pages(1000 words)Essay

Exchange Rate Risk

...In this world of modern technology and globalization, international trade and business is a skill that any successful company must learn to master. Though attempts to universalize currency have successfully created the Euro in most of Europe, international and fluctuating exchange rates as well as international banking has had an enormous impact on modern business. By understanding an international trade scenario between the British Bruce Company and a French subcontractor, the complexities and importance of international trade will be understood. The paper will discuss exchange rate and interest rate risk. Exchange Rate Risk When the Bruce Company borrowed its money in Sterling (Pounds), but was forced to pay the French...
5 Pages(1250 words)Assignment

The importance of exchange rate regimes

... The importance of exchange rate regimesExchange rates are essential indicators in the conduct of international trade and capital flows. However, the way the exchange rate in a country is managed through the exchange rate regime enforced by the government is an essential determinant of how monetary policies will be designed and implemented, ultimately, on how trade and investment flows will behave. This study examines how countries choose on exchange rate regime to employ and how such decisions lead to trade and investment flow performance. The study also seeks to look at how different exchange rate regimes lead to disparity in inflation behavior and economic growth in countries alongside why some regimes fail. Studies show...
11 Pages(2750 words)Essay

Analyze Alternative Exchange Rate Regimes

...Question List and explain the advantages of the flexible exchange rate regime. Answer. Flexible exchange rate regime permits a country’s currencyto change freely in value against other currency (Piana, 2011). A flexible exchange rate is the relative value of one currency to another controlled by the demand of the market. In this case exchange rate is price, and money is a commodity. All else remains unchanged; the higher demand would lead to appreciation of the currency, while the reduced demand would lead to deprecation of the currency. All else remains equal higher supply of currency would lead to depreciation of the currency, while the lower supply of the currency would lead to appreciation of the currency. Flexible exchange rate...
2 Pages(500 words)Essay

Exchange Rate

...Exchange Rate Risk al Affiliation) Introduction Kerr conducts business in the international market. Conducting business in the international market may involve dealing with foreign currencies, which exposes a company to risks associated with the foreign currencies (Jacque & Jacque, 1996). Kerr Inc. will lose money if the exchange rate between the U.S dollar and the Japanese Yen fluctuates negatively during the course of a transaction. In order for Kerr Inc. to mitigate the adverse fluctuations in the foreign exchange market, the company should manage the foreign exchange risk. The company can manage the foreign exchange risk by employing the following measures: Foreign exchange contracts Kerr Inc. may reduce its economic exposure...
1 Pages(250 words)Assignment

The Importance of Exchange Rates Regimes for Trade

... trade and investment flows will behave. This study examines how countries choose on exchange rate regime to employ and how such decisions lead to trade and investment flow performance. The study also seeks to look at how different exchange rate regimes lead to disparity in inflation behavior and economic growth in countries alongside why some regimes fail. Studies show that countries often use the fixed exchange rate system and even “manipulate” free floats to stabilize trade and investment environment. Moreover, studies also show that there is a strong link between fixed exchange rates and low inflation though a weaker link exists between exchange rate regime and output growth. Consequently, the more able countries can carry out...
10 Pages(2500 words)Assignment

Changing Management Regimes

The classical management perspective relied heavily on the placing of tasks and activities on the middle and lower tiers within the organization’s echelon. It focused more on carrying out the tasks at the lower levels and as such there was less accountability and answers when it came to the top management hierarchy present within the organization and indeed running the whole show. The same has changed and that too for the better so to speak. The changing times have seen that the business world has evolved and so have the different methodologies and the ways and means through which it is carried the day in day out. One needs to realize the fact that business is a consistently changing world and in this world only the people w...
8 Pages(2000 words)Term Paper

Currency Exchange as a Key Instrument of International Commerce

The globalization movement created a greater need to determine the equivalent valuation of monetary units also referred to as the exchange rate in order to execute a trade of goods among nations. Currency exchange is the trade value of one unit of currency into another currency which is required to facilitate the trade of goods and services among nations. For example, as of January 9, 2008, the currency exchange market value of one Euro was 1.47 US dollars (Yahoo, 2008). The exchange is a market mechanism that is very instrumental in the monetary policy of the nation. Both the developing nations and a developed nation must instill a sound monetary unit strategy to create a stable currency that is both liquid and valuable in the ma...
10 Pages(2500 words)Term Paper

Different Models of Exchange Rate Determination and Their Empirical Support

Specifically, some of the discussed models of exchange rate determination are the balance of payment approach model, the monetarist or asset approach model, and the martingale-random walk model. Moreover, the paper will also integrate the experiential observations and examples during the paper, in order to understand the practicality of these models.

Under the balance of payment approach, the domestic cost of foreign currency is established like the cost of any other article of trade. In other words, the market demand and supply curvatures are intersected in the exchange market for that particular foreign currency. The modeling of the abovementioned approach related to the demand and supply for foreign exchange is quite...
13 Pages(3250 words)Term Paper

Comparison of Exchange Rates of Australia and United Kingdom

...Comparison of Exchange Rates of Australia and United Kingdom (AUD/USD and GBP/USD) HI 5008 Group Assignment Instructions Group Members 2. 3. 4. Total Word Count: Course: Statistics and Research Methods for Business Decision Making Date Executive Summary The exchange rate is a price that keeps one country balance with the rest of the world country. Many factors such as changes in terms of trade with other countries, relative productivity changes and the interest rate differential with other countries determine the exchange rate of currency. This paper will compare exchange rate of two countries, Australia and United Kingdom (UK) using descriptive and inferential statistical analysis. The statistical analysis suggests...
8 Pages(2000 words)Research Paper

International Finance Organizations of Foreign Exchange Management

... making it more volatile due to the unique risks faced by each currency and as such organizations have to engage into taking hedging as a tool to avoid taking excessive losses. The following section will discuss some of the issues which a firm may consider in choosing the strategies to design and implement appropriate hedging strategies for their foreign exchange exposure. Foreign Exchange Exposure Risk Foreign Exchange Exposure is defined as “a contracted projected or contingent cash flow whose magnitude is not certain at the moment and depends on the value of the foreign exchange rates” (Sivakumar & Sarkar, 2008). The above definition indicates that the transcations concluded in foreign currencies are subject to volatilities...
8 Pages(2000 words)Research Paper

Exchange Rate Policy in the Gulf States

... in oil prices, many Gulf States have been pursued to adapt to the flexible exchange rate regimes because of rising inflationary pressures as well as bringing in more structural reforms into such economies in order to improve their long term sustainability. (Times, 2007). Further, many analysts are also indicating the recent movements in the oil price as one of the most critical reasons for bringing in the changes into the exchange rate regimes in GCC countries as most of the OPEC members believe that the mismanagement of US economy and weakening dollar against major currencies of the world is a cause of concerns as revenues continue to dwindle despite maintaining adequate supply in the market. (Feldman, 2008). This research paper...
6 Pages(1500 words)Literature review

Developing a Strategy to Enhance Workplace Learning in Workplace at Travelex Foreign Exchange

As earlier stated, I have chosen to answer Option No. 1 which is about drafting and crafting a strategic plan which can be implemented in my workplace as a learning workplace on the basis of its analysis and identification made in the earlier assignments. As also required, the initial paragraph, following this, makes a brief review of what has been done in Assignments 1 and 2. Since as a Training Coordinator, my job entails the induction, training and assessment of the progress of the new hires, I have focused my answer to these three areas and divided the paper into Induction and Training, and; Assessment/Evaluation.

The first assignment was about the physical and social environments of the workplace and in that assign...
8 Pages(2000 words)Assignment

Exchange Rate Regimes

...Table of Contents Page Introduction......................................................................................................... 2 2. Literature Review............................................................................................... 3 3. Exchange Rate Regimes and practical experience in UK............................... 7 4. Exchange rate Regimes and Financial crisis.................................................... 9 5. Financial markets and Institutions................................................................... 11 6. Conclusion........................................................................................................ 12 7. References...
14 Pages(3500 words)Term Paper

The Causes of High Crime Rate and its Solutions

...Persuasive Paper Part 2: Solution and Advantages al Affiliation) Part Revision of a Problem Exists Introduction The crime rates have been on the rising trend for a long time now. Criminal activities have been named as among the major problems facing the society in today’s world. The government has been steadfast in fighting the various forms of crimes. Although, there have been some notable achievements in this campaign, it is clear that a lot have to be done to bring the vice to the lowest levels. Apparently, a number of issues are allegedly caused by the increased crime rates. These problems includes increased public burden, increased expenses and cost to the society, the need to involve so many parties to resolve the vice, and the need...
7 Pages(1750 words)Term Paper

Exchange Rate Regimes: the Central Bank

...Exchange Rate Regimes: the Central Bank Question 1: Monetary Policy I. If the central bank has an interest rate target, why would an increase in the demand for bank reserves lead to a rise in the money supply? If the central bank has an interest rate target, an increase in the demand for bank reserves lead to a rise the money supply because the bank reserves’ demand causes an open market purchase as the government, through the central bank, raises government funds target. In order to keep the federal funds rate at the target rate, the supply will increase (Mishkin, 2007). This is illustrated in the figure below: Market federal funds rate Discount rate Target Rate Reserve Demand Deposit rate Reserves (Q) From the figure above...
7 Pages(1750 words)Assignment

What Can Be Done to Reduce the Rate of Global Warming

Global warming is because of heat emissions from the global consumption of non-renewable energy since early 1880. The sum of non-renewable energy consumption has been debauched into the heat of which a small part has been emitted to space. Therefore, the remaining heat can be indicated as global warming.
However, man has been reported to be nature’s worst enemy and the best promise at the same time. That is; for progress and pollution go hand in hand, there will be no justified end to growth, and consequently, there will be no end or escape from corruption. Therefore, pollution is just direct or indirect discharge of energy or substance by man into aquatic surroundings contributing to the unhealthy situation to human b...
10 Pages(2500 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Exchange Rate Regimes for FREE!

Contact Us