The Bretton Woods system fixed the dollar to the price of gold and created an international platform for currency exchange. Before this system was implemented‚ the gold standard was in operation from 1880 to 1914. Under this‚ each nation was to define the gold content of its currency and stood ready to buy or sell gold at this price. This was indicative of fixed currencies and exchange rates which were determined by the forces of demand and supply. The start of World War I signalled the end of the
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crisis happened‚ the Euro zone has to confront with a huge sovereign debt crisis‚ like governments’ debt increased‚ bond yield spreads widened‚ Euro exchange rate fell as well‚ which caused that the whole international financial markets gradually lost the confidence. The purpose of this essay is to discuss the impact of this crisis both on foreign exchange and derivative markets. And the rest words is to analyse several possible reasons why this small economy could trigger such a wide impact on global
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FINANCIAL INSTITUTIONS (35%) A. Banks and other financial intermediaries B. The flow of funds through financial intermediaries C. Regulation of financial institutions III. INTERNATIONAL FINANCE (10%) A. Determination of foreign-exchange rates B. International financial institutions and markets C. Current issues in international finance IV. CURRENT ISSUES A. B. C. D. E. F. G. H. (20%) Deregulation and regulatory reform The mortgage market Futures and options
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–75% 3. The asset market view of exchange rate determination says that the spot rate: a. Should follow a random walk. b. Is affected primarily by a nation’s long-run economic prospects. c. Both a and b. d. Should be strongly affected by a nation’s balance of trade. e. Should be strongly affected by current relative income‚ relative prices‚ and relative interest rates. 4. The current international flow model of exchange rate determination says
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rate cut by the Reserve Bank in its mid-quarter monetary policy review on Tuesday could keep the rupee under pressure in the next fortnight‚ they added. "Month-end dollar demand from oil importers and some banks will keep the rupee volatile till 2012-end. It is likely to move in the range of 54-55.5 but where it ends the year‚ depends on euro’s movement against the dollar‚" Dhanlaxmi Bank Executive VP (Treasury) Srinivasa Raghavan told PTI. He added that fund withdrawals by foreign institutional
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5 QUESTION 1 Compare and contrast the fixed‚ freely floating‚ and managed float exchange rate systems. ANSWER: Under a fixed exchange rate system‚ the governments attempted to maintain exchange rates within 1% of the initially set value (slightly widening the bands in 1971). Under a freely floating system‚ government intervention would be non-existent. Under a managed float system‚ governments will allow exchange rates move according to market forces; however‚ they will intervene when they believe
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economy rushes forward‚ so does the pile of social and economic contradictions threatening the future growth of China. To begin‚ China lacks a stable macroeconomic environment necessary for a strong medium-term growth‚ resultant of China’s fixed foreign exchange rate. China also runs the risk of political and social instability caused by the widening of geographic income inequalities. Environmentally speaking‚ the country is also the world’s largest consumer of raw materials and leads the way in emissions
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(ECON2114 Lecture Notes) (2014/01/06) Chapter 1 Introduction to Financial Crisis 1.1 Basic data of the financial crisis 1.2 Equilibrium exchange rate 1.3 Arbitrage and speculation 1.4 Role of the currency 1.5 Balance sheet 1.6 The history of international currency 1.7 Exchange rate system in the world 1.8 The exchange system 1.9 Determines to exchange rate 1.10 Balance pivot 1.11 Currency Crisis Theory 1.12 Five conditions for a country to be attacked Chapter 2 Bubble economy and financial
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reason for the dollar to be such a strong market force in the foreign exchange market is due to its reserve currency status‚ which makes it the most widely distributed and used currency. That is another reason why some of the other major existing and potentially strong currencies are pegged against the dollar. Of course‚ the value of the dollar is not fixed it depends on various factors. Trade deficit‚ budget deficit‚ national debt‚ foreign investment returns are some of the major factors that play
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depreciation. Besides‚ a massive increase of the foreign currency‚ say USD‚ in the daily trading market also makes the dollarization more popular in the domestic economy. The dollarization has exerted both positive and negative impacts on the economy. In particular‚ the latter draws more attraction from the government and the central bank due to its interference with the economic growth. That is the dollarization has led to the instability of foreign exchange market and the difficulty in monetary policy
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