International Liquidity

Topics: Currency, Central bank, Bretton Woods system Pages: 11 (3257 words) Published: May 17, 2011
International liquidity. External debt.

1. International Liquidity: concept, structure optimization.

International Liquidity has different meanings in international economic relations, in a limited sense, reflect the ability of international liquidity to finance the balance of payments deficit on account of foreign currency cash and other assets held by the monetary authority (central bank) of a country. More broadly, international liquidity is the ability of the country (or group of countries) to ensure timely payment of its foreign obligations by means acceptable to the lender. In terms of foreign exchange liquidity in the global economy means all sources of international finance and international payments and credit of the movement depends on ensuring the international exchange system of international reserve assets required for its normal functioning. International Liquidity characterize the external solvency of certain countries or regions. External liquidity base currency and gold reserves of the state. International liquidity structure includes the following components: • the country's official foreign reserves;

• the country's official foreign reserves;
• reserve position in IMF (member country receives an automatic right to be credited in foreign currency with no more than 25% of its quota in the IMF); • SDR accounts.
International Liquidity reflects the development of national economy, the degree of participation of the country's international trade efficiency and competitiveness of products in foreign markets. Poslech

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International liquidity is assessed through the prism of time period that can cover imports on account of international reserves held by central bank, to the extent that a country meets its imports over a period of six months of international reserves, international liquidity available, and countries in which international reserves cover the value of imports for shorter periods, have difficulties in providing international liquidity. International liquidity may provide through access to international markets, and key factors to guarantee reservations. International liquidity has three basic functions: as a means of forming liquid reserves, means of international payments (usually to finance the balance of payments) and means of foreign intervention (to protect the currency exchange rate). Poslech

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The base of international liquidity are official foreign exchange and gold reserves, ie gold and foreign currency reserves of the central bank and financial authorities of the country. Towards official foreign exchange and gold reserves refers gold bullion reserve standards, and also the high liquidity of foreign assets in freely convertible currency (reserve currency). In addition, the gold reserves may include precious metals (platinum and silver). High liquidity means to be placed in secure institutions with minimal risk, ie the institutions that are classified according to international classification as high-class security institutions. An important place they occupy in the international liquidity of gold. It is used as a great way to meet external obligations through the sale on the market for a particular creditor or transfer foreign currency as collateral to receive foreign loans. Currently there is a consistent trend of increasing foreign exchange component in the overall structure of international liquid assets, while still the gold is calculated at a fixed price of SDR 35 an ounce which is much cheaper than the market. Liquid positions debtor countries are characterized by the following indicator: foreign exchange and gold reserves / external debt. Reserves form their unconditional liquidity that the central banks may conduct without a restriction. Borrowed resources form conditional liquidity. The use of borrowed resources is linked to the particular demands of...
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