BUSI2025 Lecture Notes - Lecture 10: Foreign Exchange Market, Monetary System, Currency Board
Document Summary
System of exchange rates and international payments that facilitates trade and investment. Currency exchange rates depend on the structure of the ims: rules governing currency exchange, floating system: supply/demand in the foreign exchange market determines value, pegged system: value fixed to a reference country, dirty float. Minority of countries have a floating currency: e. g. Other exchange rate regimes: peg to major currencies (us$ or euro) or to basket of currencies (e. g. china quasi-fixed, Saudi arabia, pakistan: managed floating within a range of another currency (e. g. thailand, russia, india, no separate legal tender (e. g. eu, adjustable peg (band system, e. g. brazil before january 1999, currency board (e. g. hong kong) The case for floating exchange rates: monetary policy autonomy, help with trade balance adjustment. The case for fixed exchange rates: monetary discipline, speculation limited, uncertainty reduced. The imf today: the quota system, assistance programs http://www. imf. org/external/mmedia/view. aspx?vid=5128323437001, special drawing rights (sdrs) Total quotas: us billion (as of april 2018)
