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Financial Accounting and Accounting Standards
Financial Accounting and Accounting Standards

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Currency Privatization as a Substitute for Currency
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Sehlhorst, Daniel - University of Notre Dame
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... to overwhelmingly dominate Venezuelan exports,13 just as they did in Mexico in the 1980s. These complications also made a transition difficult in Mexico, eventually leading to a devaluation nosedive that caused the 1995 crisis. A fixed exchange rate can effectively achieve the goals above in the sho ...
Currency Union and Disunion in Europe and the Former Soviet Union
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... An even stronger law of currency areas is that nations seldom have more than a single currency. A powerful argument for the one country – one currency pattern is that it is difficult to negotiate national budgets if sub-groups have a choice of currency in which to pay taxes or receive expenditures. ...
This PDF is a selection from an out-of-print volume from... of Economic Research
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... once again under the shadow of financial instability, though decidedly not on the ropes. Acute overvaluation, melting of confidence, questions about the sustainability of reforms are all back. Today the questions are how much of the recent progress can be carried forward and how best to defuse the c ...
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... money outside the country where it is issued. An international currency is used in invoicing exports and imports of goods and services and in denominating financial instruments traded in global financial markets. Obviously, this is not a workable definition. For an operational definition, it may be ...
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... 1/ It is easy to find quotes in the Literature that refer either to propositions 1 or to proposition 2, or to both at the same time. For example, CarLos Diaz—Aiejandro (1983) states: [S]tandard models would predict that the following variables would infLuence its real exchange rate...an improvement ...
This PDF is a selection from an out-of-print volume from... Bureau of Economic Research
This PDF is a selection from an out-of-print volume from... Bureau of Economic Research

... price in world markets) is sufficiently high to make actual growth in the real exchange rate unnecessary. Even then it is usually the case that a real exchange rate level has to be maintained over time. Governments, of course, seldom know how to solve optimality problems, nor do they know the path o ...
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Fixed exchange-rate system

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime where a currency's value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold. There are benefits and risks to using a fixed exchange rate. A fixed exchange rate is usually used in order to stabilize the value of a currency by directly fixing its value in a predetermined ratio to a different, more stable or more internationally prevalent currency (or currencies), to which the value is pegged. In doing so, the exchange rate between the currency and its peg does not change based on market conditions, the way floating currencies will do. This makes trade and investments between the two currency areas easier and more predictable, and is especially useful for small economies in which external trade forms a large part of their GDP.A fixed exchange-rate system can also be used as a means to control the behavior of a currency, such as by limiting rates of inflation. However, in doing so, the pegged currency is then controlled by its reference value. As such, when the reference value rises or falls, it then follows that the value(s) of any currencies pegged to it will also rise and fall in relation to other currencies and commodities with which the pegged currency can be traded. In other words, a pegged currency is dependent on its reference value to dictate how its current worth is defined at any given time. In addition, according to the Mundell–Fleming model, with perfect capital mobility, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.In a fixed exchange-rate system, a country’s central bank typically uses an open market mechanism and is committed at all times to buy and/or sell its currency at a fixed price in order to maintain its pegged ratio and, hence, the stable value of its currency in relation to the reference to which it is pegged. The central bank provides the assets and/or the foreign currency or currencies which are needed in order to finance any payments imbalances.In the 21st century, the currencies associated with large economies typically do not fix or peg exchange rates to other currencies. The last large economy to use a fixed exchange rate system was the People's Republic of China which, in July 2005, adopted a slightly more flexible exchange rate system called a managed exchange rate. The European Exchange Rate Mechanism is also used on a temporary basis to establish a final conversion rate against the Euro (€) from the local currencies of countries joining the Eurozone.
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