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The appreciation of the Euro can be attributed to increasing trade surpluses in the Eurozone countries for the past years and the low rates of inflation in the Eurozone countries. For the past years, countries in the Eurozone such as France, Germany and the other seventeen countries have experienced an increase in the amounts of exports compared to imports than other countries. For instance, in 2013, the Euro Zone exports accounted for about 13.2% of GDP while import stood at 12.6% leading to a 2.7 current accounts deficit (De La Dehesa 4). On the other hand, during the same year, U.S. exports accounted for about 13.5% of GDP while imports stood at 16.2% leading to a 2.7 current accounts deficit (4). For this reason, the Euro has been gaining strength especially in the last six years due to better current accounts compared to the U.S.
Conversely, the move by the European Central Bank (ECB) to wipe out about €1 trillion two years out of the economy of the Eurozone in a move to withdraw loans taken by banks during the debt crisis is another significant factor that has led to a higher appreciation of the Euro relative to other world currencies (De Grauwe and Paulson). In addition, De La Dehesa argues that short-term rates in the U.S. react mainly to trends in the U.S.’s equity markets. He goes ahead to say that, for this reason, short-term interest rates have a higher impact on exchange rates in the Euro area unlike in the U.S. For instance, from a historical perspective a rise of 100 basis points in U.S. short-term interest rates leads to an appreciation of the dollar by 1.7% compared to 5.7% in the Euro area (De La Dehesa 4). For this reason, De La Dehesa conclude that the Eurozone economy is more open than the U.S. economy.
The Yuan has been appreciating in recent past due to the massive growth of the Chinese economy. China has grown to become the second-largest
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BOP compares the difference in Dollars due to exports and imports in a country and also includes financial exports and imports (Investopedia, 2011). The exchange rate decision of the government policy affects the balance of payment. It is the policy that might turn out to be positive or negative, which might lead to BOP crisis (Williamso, 2004).
about evaluating various measures taken up by the government of a country for resolving balance of payment (BoP) crisis. The aim of this paper is to critically evaluate the degree of relationship between those measures. But before presenting an in-depth discussion on this topic area, it would be essential to understand the root cause of the crisis in balance of payment.
They promote means of payment between buyers and sellers of different nations including deferred payments. It provides the framework for ensuring liquidity without fuelling inflation and corrects the global imbalances or restricts their emergence, while facilitating an orderly payment system.
General fund profited intra-European trade through assisting shareholders accumulate great sums of finances at the expense of money exchanges. The time the Euro was launched in 2002, its worth was nearly one for one versus the U.S dollar. Since that time, the Euro has slowly grown in worth versus other monies.
It is through the flow of the international currencies to economies that affect the rules under which institutions are formed and governed, while also determining the success of businesses (IMFS 126). The structure of the international monetary and finance affects the political relationships between countries globally, thus explaining why the powerful countries are able to exert their authority and power over the less developed and less influential countries in the world.
International monetary finance structure is explained in detail in chapter 7. The chapter begins by comprehensively throwing light upon the exchange rate. The math of exchange rate has been very well explained at the beginning of the chapter. The foreign exchange market diagram explains how the demand of goods produced in the United States changes the value of the Mexican Peso and based on that how the value of the United States Dollar changes.
These new economic ties and technologies, in turn, have led to a decline in the territorial nature of everyday life. Globalization first emerged with the end of the Second World War, especially after the dire economic policies of the 1930s led to a sharp decline in international trade.
This trade has helped to develop the current world and globalize the way in which interactions take place. As a way of discussing this interaction to a greater degree of depth, the following analysis will serve as a discussion of the key points and relevant levels of understanding that are presented within the text of Chapter 7.
Robert Olivier declared: "their major objective was to provide a world within which competitive market forces would operate freely, unhampered by government interference, for they supposed that market forces would produce optimum results for the entire world.
This rapid growth was because of the following factors. The gold average refers to the technique, which controlled the worth of exchanges around the world in expressions of a convinced quantity of gold (Staiger, 2006).
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