3.2 Exchange Rates.

Slides:



Advertisements
Similar presentations
At the end of the lesson u should be able to: assess the advantages and disadvantages of floating ER system vis-à-vis the fixed ER system.
Advertisements

THE OPEN ECONOMY: INTERNATIONAL ASPECTS
Policies to correct balance of payments disequilibrium
Unit: International Trade Topic: Balance of Payments and the Foreign Exchange Market.
The theory of relativity applied to international trade
International Finance
Exchange Rates By Katie Murray. – Def: The price of one currency in terms of another.
1 FOREIGN DEBT & FOREIGN INVESTMENT. 2 Foreign debt may be defined as the amount of money that a country’s residents, both public and private, owe to.
The link between domestic savings, foreign savings, and domestic investment
The exchange rate system in Hong Kong Linked exchange rate system.
Lectures in Macroeconomics- Charles W. Upton Fixed Exchange Rates.
The Russian Default of 1998 A case study of a currency crisis Francisco J. Campos, UMKC 10 November 2004.
International Financial Crises What happened in Asia? Globalization, R. Bonoan & J. Shapiro November 21, 1999.
Economics 282 University of Alberta
The balance of payments, exchange rates, and trade deficits
Module Exchange Rate Policy KRUGMAN'S MACROECONOMICS for AP* 43 Margaret Ray and David Anderson.
Economics – A Course Companion Blink & Dorton, P
© 2005 McGraw-Hill Ryerson Ltd. Macroeconomics, Chapter 17 1 EXCHANGE RATES AND THE BALANCE OF PAYMENTS SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE.
EXCHANGE RATES AND THE MARKET FOR FOREIGN EXCHANGE Lecture 05 /06.
 The European Central Bank is responsible for formulating and implementing monetary policy for the Eurozone.
Slide 1 of Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson.
1 Exchange Rates. 2 Exchange Rate: Definition The exchange rate is the price of a currency in terms of another currency. Thud the exchange rate for the.
 All commercial transactions between two or more countries.
The Balance of Payments Account  Meaning of the balance of payments  The current account.
 Monetary policy- changes in the money supply to fight inflations or recessions.
EXCHANGE-RATE REGIME AND RESPONSE TO THE CRISIS IN THE EU NEW MEMBER STATES KALIN HRISTOV.
ISLM Analysis of the Open Economy (ISLMBP Analysis)
© Pilot Publishing Company Ltd Chapter 12 International Finance I --- Exchange Rate.
International Economics Floating Exchange Rates and Internal Balance
International Economics
Fixed and Floating Exchange Rates
Exchange Rate Policy Chapter An exchange rate regime is a rule governing policy toward the exchange rate.  A country has a fixed exchange rate.
Exchange Rates, the Balance of Payments, & Trade Deficits Chapter 21 10/5/
STEPS TO INTEGRATION FREE TRADE AREA - free movement of goods and services CUSTOMS UNION - free movement of goods and services and factors of production.
International Trade. Balance of Payments The Balance of Payments is a record of a country’s transactions with the rest of the world. The B of P consists.
Exchange Rate Regimes Because governments set quantity of money, they have significant influence on exchange rates, which in turn is important to net.
Copyright © 2012 McGraw-Hill Australia Pty Ltd PowerPoint presentation to accompany Economic Principles 3e, by Jackson, McIver, Wilson & Bajada Slides.
Government Influence on Exchange Rates
Parity Conditions in International Finance International Finance (MB 74)
Evaluation of exchange rate systems. Fixed Exchange Rates: Advantages 1. Favour business investments No uncertainty → easy to plan future investments.
Determination of exchange rates By Mr. Benz & Mr. Win.
Lecture 21 International Monetary System Exchange Rate Systems Floating Rate System vs Fixed Exchange Rate Systems Brief History The Eurocurrency Market.
Exchange rate policy 1  Fixed and floating exchange rates  Alternatives to foreign exchange intervention  Monetary policy and  floating exchange rates.
24 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. The Balance of Payments, Exchange Rates, and Trade Deficits.
Chapter 10 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy Copyright © 2012 Pearson Education Inc.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
Exchange Rates The value of one country’s currency in terms of another country’s currency.The value of one country’s currency in terms of another country’s.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license.
Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Macroeconomics 7/e by Jackson and McIver Slides prepared by Muni Perumal, University of Canberra,
What is purchasing power parity?. Depreciation The loss of value of a country's currency with respect to a foreign currency If the dollar loses value.
EXCHANGE RATE DETERMINATION
With floating exchange rates, changes in market demand and market supply of a currency cause a change in value. In the diagram below we see the effects.
Balance of Payments and Exchange Rates. The Balance of Payments Account Meaning of the balance of payments The current account Meaning of the balance.
Topics on the balance of payments. Consequences of persistent current account deficits and financial account surpluses.
International Monetary System. Chapter Chapter Preview List the benefits of stable and predictable exchange rates Discuss the law-of-one-price principle.
The Balance of Payments & Exchange Rates. Balance of Payments The total of all economic transactions between a nation and the rest of the world Credits-
Chapter 38 The Balance of Payments, Exchange Rates, and Trade Deficits
Matakuliah : J0114-Teori Ekonomi
36 Exchange Rates, the Balance of Payments, and Trade Deficits.
36 Exchange Rates, the Balance of Payments, and Trade Deficits.
Revision Theme 4 Topic 4.1 International economics
Fixed (Pegged) vs Floating Exchange Rates
3.3 Balance of Payments.
NS3040 Dollarization in Latin America Fall Term, 2018
International Trade Policy
International Economics Floating Exchange Rates and Internal Balance
Economics - Notes for Teachers
International Payment Flows and Economic Policy in a Global World Prof
EXCHANGE RATE DETERMINATION Arun Mishra
Presentation transcript:

3.2 Exchange Rates

Evaluation of exchange rate systems Fixed (advantages) Predictability and certainty Domestic fiscal discipline Inflation Downward pressure on currency Depleting foreign reserves to prop up currency

Evaluation of exchange rate systems Fixed (disadvantages) Large and persistent CADs Deplete foreign reserves Interest rate tampering Large borrowing Reducing AD What negative effects could come?

Evaluation of exchange rate systems Floating (advantages) Current account is self-correcting No large foreign reserves necessary Freedom in domestic fiscal/monetary policy Reduced risk of imported inflation Reduced speculation

Evaluation of exchange rate systems Floating (disadvantages) Lack of predictability Less reason to maintain fiscal/monetary discipline Loss of competitiveness/efficiency Can rely on depreciation to remain competitive

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.