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International Exchange-Rate Systems
Gold Standard (1879 - 1934):
-Valuing currencies in terms of gold
-Stocks of money are tied to gold
-Gold is allowed to flow b/w nations if there are balance-of-payment deficits and surplus
-Devaluation: government intentionally lowering the international value of the currency
The Bretton Woods System: The international monetary system developed after the Second World War in which adjustable pegs were employed, the International Monetary Fund helped stabilize foreign exchange rates, and gold and the dollar were used as international monetary reserves.
The current system: the managed float:
Managed floating exchange rate: an exchange rate that is allowed to change (float) as a result of changes in currency supply and demand but at times is altered (managed) by governments in the short run via their buying and selling of particular currencies.
-Valuing currencies in terms of gold
-Stocks of money are tied to gold
-Gold is allowed to flow b/w nations if there are balance-of-payment deficits and surplus
-Devaluation: government intentionally lowering the international value of the currency
The Bretton Woods System: The international monetary system developed after the Second World War in which adjustable pegs were employed, the International Monetary Fund helped stabilize foreign exchange rates, and gold and the dollar were used as international monetary reserves.
The current system: the managed float:
Managed floating exchange rate: an exchange rate that is allowed to change (float) as a result of changes in currency supply and demand but at times is altered (managed) by governments in the short run via their buying and selling of particular currencies.
- More volatile exchange rates than those during the Bretton Woods times.
- Some people do not even consider this a "system." More or less, it is letting supply and demand be and then the government intervenes whenever it seems fit. This reduces inefficiencies created by fixed exchange rates, but protects allows a nation to protect itself when it feels it be necessary.
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Robert.Wang |
Latest page update: made by Robert.Wang
, Apr 29 2008, 11:29 AM EDT
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