
What We Do - Chicago Fed
... the need for a central bank, they will need to experience what an economy might be like without the Federal Reserve. Explain that during the 19th Century, there was no central monetary authority. Currency was being issued by many banks. As more notes were issued, currency would begin to lose its pur ...
... the need for a central bank, they will need to experience what an economy might be like without the Federal Reserve. Explain that during the 19th Century, there was no central monetary authority. Currency was being issued by many banks. As more notes were issued, currency would begin to lose its pur ...
A Currency Boards: Once and Future Monetary Regimes?
... and banks’ credit from increasing more rapidly than the boards’ stock of reserve assets for very long. These regulations also can specify minimum values for reserve requirements that prevent the money multiplier from rising very high. This linking of banks’ credit to reserve assets is most important ...
... and banks’ credit from increasing more rapidly than the boards’ stock of reserve assets for very long. These regulations also can specify minimum values for reserve requirements that prevent the money multiplier from rising very high. This linking of banks’ credit to reserve assets is most important ...
Analogy Based Valuation of Currency Options
... vice-versa. To take a concrete example, suppose the domestic interest rate is 1% per annum, and foreign interest rate is 3% per annum. The forward rate would suggest depreciation in the foreign currency of around 2% per annum to offset the arbitrage opportunity arising from the interest rate advanta ...
... vice-versa. To take a concrete example, suppose the domestic interest rate is 1% per annum, and foreign interest rate is 3% per annum. The forward rate would suggest depreciation in the foreign currency of around 2% per annum to offset the arbitrage opportunity arising from the interest rate advanta ...
Notes on the Shadow Exchange Rate The shadow exchange rate
... This approach has been applied in a number of studies with the broad conclusion that the main variables determining real exchange rates are relative productivity trends, changes in trade policy and the terms of trade, with productivity trends the major influence. Empirical estimation of the ERER is ...
... This approach has been applied in a number of studies with the broad conclusion that the main variables determining real exchange rates are relative productivity trends, changes in trade policy and the terms of trade, with productivity trends the major influence. Empirical estimation of the ERER is ...
1 Forthcoming in Journal of Globalization and Development
... world reserve asset would depend on the broader use of SDRs. However, this would make the transition more costly for the U.S. and it is therefore likely to face greater resistance in this country. So, in the short-term it may be useful to concentrate on reforming the global reserve system, which mea ...
... world reserve asset would depend on the broader use of SDRs. However, this would make the transition more costly for the U.S. and it is therefore likely to face greater resistance in this country. So, in the short-term it may be useful to concentrate on reforming the global reserve system, which mea ...
Exchange Rate Devaluation and Reshuffling of Global Jobs
... transferred to the home country (Das, 1980; Buffie, 1982; Hanson, 1983). Devaluations would then modify the allocation of production processes. Various models have been produced to deal with the international splitting of production processes. The oldest approach is developed by Vanek (1963) and fol ...
... transferred to the home country (Das, 1980; Buffie, 1982; Hanson, 1983). Devaluations would then modify the allocation of production processes. Various models have been produced to deal with the international splitting of production processes. The oldest approach is developed by Vanek (1963) and fol ...
18 – Monetary Policy
... greater uncertainty for banks and make liquidity management more difficult. ...
... greater uncertainty for banks and make liquidity management more difficult. ...
PPT
... The Bretton Woods system and the IMF 1944: A conference held in Bretton Woods, NH established a new Bretton Woods system of exchange rates, under which countries pledged to buy and sell their currencies at a fixed rate against the dollar—and effectively against each others’ currencies. The U.S., in ...
... The Bretton Woods system and the IMF 1944: A conference held in Bretton Woods, NH established a new Bretton Woods system of exchange rates, under which countries pledged to buy and sell their currencies at a fixed rate against the dollar—and effectively against each others’ currencies. The U.S., in ...
Chapter 7
... • From 1944 to 1973, central banks throughout the world fixed the value of their currencies relative to the U.S. dollar by buying or selling domestic assets in exchange for dollar denominated assets. • Arbitrage ensured that exchange rates between any two currencies remained fixed. – Suppose Bank of ...
... • From 1944 to 1973, central banks throughout the world fixed the value of their currencies relative to the U.S. dollar by buying or selling domestic assets in exchange for dollar denominated assets. • Arbitrage ensured that exchange rates between any two currencies remained fixed. – Suppose Bank of ...
I. INTERNATIONAL DEVELOPMENTS
... budget deficits recently, the ratio of public debt to GDP continues to rise in many countries (Chart I.11, Chart I.12). The increase in indebtedness rates is more apparent particularly in periphery countries which experience a contraction in economic activity and are obliged to pay high interests at ...
... budget deficits recently, the ratio of public debt to GDP continues to rise in many countries (Chart I.11, Chart I.12). The increase in indebtedness rates is more apparent particularly in periphery countries which experience a contraction in economic activity and are obliged to pay high interests at ...
Exchange Rate Regimes
... habits? All that is required is that everyone decide to come to his office an hour earlier, have lunch an hour earlier, etc. But obviously it is much simpler to change the clock that guides all than to have each individual separately change his pattern of reaction to the clock, even though all want ...
... habits? All that is required is that everyone decide to come to his office an hour earlier, have lunch an hour earlier, etc. But obviously it is much simpler to change the clock that guides all than to have each individual separately change his pattern of reaction to the clock, even though all want ...
table 1 here
... The “contagion” describes the situation where a country undergoes an economic shock such as a devaluation and a stock exchange crash, following a similar crisis in another country. The theories which explain the transmission mechanisms of this “virus” can be placed into two different categories. Acc ...
... The “contagion” describes the situation where a country undergoes an economic shock such as a devaluation and a stock exchange crash, following a similar crisis in another country. The theories which explain the transmission mechanisms of this “virus” can be placed into two different categories. Acc ...
COMPARATIVE ANALYSIS OF THE MEXICAN AND TURKISH CURRENCY CRISES
... growth rate was well below the growth in consumption in the 1987-1994 period. During the same period, the decline in national savings was striking (Table-5). ...
... growth rate was well below the growth in consumption in the 1987-1994 period. During the same period, the decline in national savings was striking (Table-5). ...
The EMU and the Theory of Optimum Currency Areas
... cushioning the disruptive impact of various economic shocks. On the other hand, exchange rate flexibility can have potentially harmful effects, such as making relative prices less predictable or undermining the government’s resolve to keep inflation in check. To weigh the economic costs of joining a ...
... cushioning the disruptive impact of various economic shocks. On the other hand, exchange rate flexibility can have potentially harmful effects, such as making relative prices less predictable or undermining the government’s resolve to keep inflation in check. To weigh the economic costs of joining a ...
speech by Ben Broadbent at Imperial College, London, on Thursday
... strong growth in domestic demand . And it’s this that jointly pushes up both the value of currency and the ...
... strong growth in domestic demand . And it’s this that jointly pushes up both the value of currency and the ...
Chapter 2
... Should Trade Restrictions be Used to Influence Human Rights Issues? POINT: Yes. Some countries do not protect human rights in the same manner as the U.S. At times, the U.S. should threaten to restrict U.S. imports from or investment in a country if it does not correct human rights violations. The U. ...
... Should Trade Restrictions be Used to Influence Human Rights Issues? POINT: Yes. Some countries do not protect human rights in the same manner as the U.S. At times, the U.S. should threaten to restrict U.S. imports from or investment in a country if it does not correct human rights violations. The U. ...
Spot Market
... • Note how the 5.2 percent decline was augmented by the 2.6 gain, resulting in an overall 7.7 percent gain in purchasing power. Spot Market ...
... • Note how the 5.2 percent decline was augmented by the 2.6 gain, resulting in an overall 7.7 percent gain in purchasing power. Spot Market ...
chapter 6 unemployment and labour force planning
... Chief Instruments of Economic Policy The two important subdivisions of economic policy are the monetary policy and the fiscal policy. These two policies are applied as mutually complementary policies to serve as instruments of government’s economic policy which is applied to achieve certain social g ...
... Chief Instruments of Economic Policy The two important subdivisions of economic policy are the monetary policy and the fiscal policy. These two policies are applied as mutually complementary policies to serve as instruments of government’s economic policy which is applied to achieve certain social g ...
Lecture 1
... discipline under a fixed exchange rate The real exchange rate always floats Through nominal exchange rate adjustment or price change, but this may take time ...
... discipline under a fixed exchange rate The real exchange rate always floats Through nominal exchange rate adjustment or price change, but this may take time ...
INSTITUTE OF ECONOMIC STUDIES
... Capital charges are relatively countercyclical because the internalization of currency risk into the capital margin of banks, reduces the capital ratio and increases the capital cost of foreign currency lending in time of booming asset markets, and lessens the severity of loan contraction during cri ...
... Capital charges are relatively countercyclical because the internalization of currency risk into the capital margin of banks, reduces the capital ratio and increases the capital cost of foreign currency lending in time of booming asset markets, and lessens the severity of loan contraction during cri ...
impossible trinity
... A tax on capital inflows can in principle help a country maintain a high domestic interest rates without experiencing a substantial inflow of capital. In addition, by taxing short-term capital inflow more than longer-term inflows, capital inflow controls can also in principle influence the compositi ...
... A tax on capital inflows can in principle help a country maintain a high domestic interest rates without experiencing a substantial inflow of capital. In addition, by taxing short-term capital inflow more than longer-term inflows, capital inflow controls can also in principle influence the compositi ...
! " The Demand for Base Money in Turkey:
... the Central Bank (CBRT) has started to create TL trough foreign exchange (FX) transactions and used open market operations to smooth out the short-term pressures on the availability of liquidity. It was expected that this new policy choice would enable CBRT to accumulate FX reserves and thereby woul ...
... the Central Bank (CBRT) has started to create TL trough foreign exchange (FX) transactions and used open market operations to smooth out the short-term pressures on the availability of liquidity. It was expected that this new policy choice would enable CBRT to accumulate FX reserves and thereby woul ...
Currency war

Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a country's currency falls so too does the price of exports. Imports to the country become more expensive. So domestic industry, and thus employment, receives a boost in demand from both domestic and foreign markets. However, the price increase for imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency. Countries have generally allowed market forces to work, or have participated in systems of managed exchanges rates. An exception occurred when currency war broke out in the 1930s. As countries abandoned the Gold Standard during the Great Depression, they used currency devaluations to stimulate their economies. Since this effectively pushes unemployment overseas, trading partners quickly retaliated with their own devaluations. The period is considered to have been an adverse situation for all concerned, as unpredictable changes in exchange rates reduced overall international trade.According to Guido Mantega, the Brazilian Minister for Finance, a global currency war broke out in 2010. This view was echoed by numerous other government officials and financial journalists from around the world. Other senior policy makers and journalists suggested the phrase ""currency war"" overstated the extent of hostility. With a few exceptions, such as Mantega, even commentators who agreed there had been a currency war in 2010 generally concluded that it had fizzled out by mid-2011.States engaging in possible competitive devaluation since 2010 have used a mix of policy tools, including direct government intervention, the imposition of capital controls, and, indirectly, quantitative easing. While many countries experienced undesirable upward pressure on their exchange rates and took part in the ongoing arguments, the most notable dimension of the 2010–11 episode was the rhetorical conflict between the United States and China over the valuation of the yuan. In January 2013, measures announced by Japan which were expected to devalue its currency sparked concern of a possible second 21st century currency war breaking out, this time with the principal source of tension being not China versus the US, but Japan versus the Eurozone. By late February, concerns of a new outbreak of currency war had been mostly allayed, after the G7 and G20 issued statements committing to avoid competitive devaluation. After the European Central Bank launched a fresh programme of quantitative easing in January 2015, there was once again an intensification of discussion about currency war.