BUSI 1701 Lecture Notes - Lecture 6: Floating Exchange Rate, European Central Bank, Federal Reserve System

• School: Carleton University
• Department: Business
• Course: BUSI 1701
• Professor: William Clements

Document Summary

International monetary system: the i(cid:374)te(cid:396)(cid:374)atio(cid:374)al (cid:373)o(cid:374)eta(cid:396)(cid:455) s(cid:455)ste(cid:373)s (cid:396)efe(cid:396) to the i(cid:374)stitutio(cid:374)al a(cid:396)(cid:396)a(cid:374)ge(cid:373)e(cid:374)ts that (cid:272)ou(cid:374)t(cid:396)ies adopt to govern exchange rates, a (cid:272)ou(cid:374)t(cid:396)(cid:455) (cid:272)a(cid:374) (cid:272)hoose f(cid:396)o(cid:373) a(cid:373)o(cid:374)g fou(cid:396) diffe(cid:396)e(cid:374)t t(cid:455)pes of e(cid:454)(cid:272)ha(cid:374)ge (cid:396)ate regimes, namely, floati(cid:374)g e(cid:454)(cid:272)ha(cid:374)ge (cid:396)ate, pegged e(cid:454)(cid:272)ha(cid:374)ge (cid:396)ate, di(cid:396)t(cid:455) float. The value of the currency is fixed relative to a reference currency such as the us dollar, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate. A system in which the exchange rate for converting one currency into another is fixed. Monetary authorities at the national level: (a)central bank. A (cid:272)e(cid:374)t(cid:396)al (cid:271)a(cid:374)k is usuall(cid:455) a (cid:272)ou(cid:374)t(cid:396)(cid:455)"s p(cid:396)i(cid:373)a(cid:396)(cid:455) (cid:373)o(cid:374)eta(cid:396)(cid:455) autho(cid:396)it(cid:455) that is usuall(cid:455) (cid:396)espo(cid:374)si(cid:271)le fo(cid:396) issui(cid:374)g (cid:272)u(cid:396)(cid:396)e(cid:374)(cid:272)(cid:455), ad(cid:373)i(cid:374)iste(cid:396)i(cid:374)g (cid:373)o(cid:374)eta(cid:396)(cid:455) poli(cid:272)(cid:455), holdi(cid:374)g (cid:373)e(cid:373)(cid:271)e(cid:396) (cid:271)a(cid:374)ks" deposits, a(cid:374)d fa(cid:272)ilitati(cid:374)g the (cid:374)atio(cid:374)"s (cid:271)a(cid:374)ki(cid:374)g i(cid:374)dust(cid:396)(cid:455). Examples: bank of canada, us federal reserve system (b) currency board.