PPT-Lectures 21 - 22 Fixed versus Floating Exchange rates: International Experience

Why do some countries choose to fix and others to float Why do they change their minds at different times These are among the most enduring and controversial questions in international macroeconomics. In international trade it becomes necessary for individuals in different countries who want to buy and sell from one another to exchange currencies. There are approximately 150 different currencies in circulation in the world today. In the process of trading between nations, foreign exchanges of currency must be made.. 2. Exchange Rate Essentials. Exchange Rates in Practice. The Market for Foreign Exchange. Arbitrage and Spot Exchange . Rates. . Arbitrage . and . Interest Rates. Conclusions. © 2014 Worth Publishers . 4/2/2012. Unit 3: Exchange Rates. Exchange Rate Regimes. fixed exchange rate . –. a currency's value is matched to the value of another single currency or to a commodity (e.g., gold). floating exchange rate . Monetary System. Relationship between monetary system and foreign exchange rates. Historical development. Fixed vs floating exchange rates. Role of the IMF and World Bank. Implications for managers. International Monetary System. . 10e. By Charles W.L. Hill. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.. Chapter 11. The International Monetary System. International Monetary Experience. Prepared by:. Fernando Quijano. Dickinson State University. 19. 1. Exchange Rate. Regime Choice: . Key Issues. 2. Other Benefits. of Fixing. 3. Fixed Exchange. Rate Systems. Chapter . 8. . International . Monetary System. Fixed vs. . Floating. 2. Chapter Outline. Goals of macroeconomic policies – internal and external balance. Gold standard era: 1870-1914. International monetary system during interwar period: 1918-1939 . Professor Malamud. BEH 502 895 – 3294 . Email: . bernard.malamud@unlv.edu. Website: . http://faculty.unlv.edu/bmalamud. . Office . Hours:MW. 11:30 – 12:30 pm; 2:30 - 3:30 pm; and by appointment. Professor Malamud. BEH 502 895 – 3294 . Email: . bernard.malamud@unlv.edu. Website: . http://faculty.unlv.edu/bmalamud. . Office . Hours:TTh. 1 – 2 pm. ; . 4 – 5 pm. ; and by appointment. International Monetary Relations. Fixed vs. Floating. The exchange rate fluctuates in a narrow range (or not at all) against a base currency over a sustained period of time. . Government action is needed to maintain the exchange rate.. 1966–1972. Effect on Internal and External Balance of a Rise in the Foreign (US) Price Level, . P*. The “simple” solution for the £, M, . ¥, FF, …. Revalue against the . $. Let the . $. depreciate. Foreign Exchange Intervention. 18-. 2. Preview. Balance sheets of central banks. Intervention in the foreign exchange markets and the money supply. How the central bank fixes the exchange rate. Monetary and fiscal policies under fixed exchange rates. RATe. An . exchange rate regime, also known as the pegged exchange rate, wherein the government and central bank attempts to keep the value of the currency is fixed against the value of other currencies, is called fixed exchange rate. . Chapter 18 . Krugman. and . Obstfeld. 9e. ECO41 International Economics. Udayan. Roy. Why Study Fixed Exchange Rates?. Four reasons to study fixed exchange rates:. Managed floating. Regional currency arrangements.