...Great mistakes in currency exchange system in Iran Foreign exchange rates is a key point in good performance of economic system in each country. Currency exchange rates is a key variable in regulating incoming and outgoing of capital, importing and exporting goods in an economy. Exchange rates is one of the most important factors in maintaining competition potentials of a country in international markets and as a result, non-oil exportation of the country, and an important factor for being independent from oil export. More even that these, exchange rates is an effective factor in maintaining competitive domestic producers against importing foreign goods flood, goods that mostly resourcing from oil export price. Every economist well knows that specifying currency rates has a determinant role in maintaining the stability, mobility, economic growth and development of the country. So, even a small mistake in determining currency exchange rate leads to great costs and losses for the country. Unfortunately, Iranian politicians and their economic advisors have made great mistakes in the guidance and regulation of foreign exchange rate as they made mistake in many other economy key variables. This is either due to lack of right intelligence regarding currency exchange and its impressions on economy, which comes from great theoretical mistakes, or due to political preference rationality against economics rationality which is the result of different political pressures. Anyway, regardless...
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...the set of assets in an economy that people regularly use to buy goods and services from other people. Money Supply The money supply is a policy variable that is controlled by the Fed. * Through instruments such as open-market operations, the Fed directly controls the quantity of money supplied. Money Demand Money demand has several determinants, including interest rates and the average level of prices in the economy. People hold money because it is the medium of exchange. * The amount of money people choose to hold depends on the prices of goods and services. In the long run, the overall level of prices adjusts to the level at which the demand for money equals the supply. Figure 1 Money Supply, Money Demand, and the Equilibrium Price Level Figure 2 The Effects of Monetary Injection Chapter 31 Open-Economy Macroeconomics: Basic Concepts Open and Closed Economies * A closed economy is one that does not interact with other economies in the world. * There are no exports, no imports, and no capital flows. * An open economy is one that interacts freely with other economies around the world. An Open Economy * An open economy interacts with other countries in two ways. * It buys and sells goods and services in world product markets. * It buys and sells capital assets in world financial markets. THE INTERNATIONAL FLOW OF GOODS AND CAPITAL An Open Economy * The United States...
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...Hong Kong Case Q1: Explain the mechanism of currency attacks. Currency attacks in emerging market economies and advanced economies occur by following some similar steps and stages but with some notable differences. Since this case is about an emerging economy so we will be discussing the mechanism of currency attacks in an emerging market. There are three following stages that lead an economy to full financial crisis. 1. Initiation of financial crisis 2. Currency crisis 3. Full-fledged financial crisis Stage 1: Initiation of Financial Crisis The reasons that leads an emerging market country towards financial crisis initiation includes the first two basic paths and some additional factors and they all make the problems of moral hazard and adverse selection worsen. A. Mismanagement of financial liberalization B. Severe fiscal imbalances C. Asset price decline D. Increase in interest rate E. Increase in uncertainty Financial liberalization is the eradication of restrictions from all the domestic financial institutions and markets and allowing them to trade with the financial firms of other nations. It has a benefit of financial development in long run but in short run it lead financial institutions to riskier lending (credit boom) and its mismanagement takes an economy towards a bubble. The financial institutions, regulators of bank, and other lenders in emerging economy do not have much expertise to cope the risk of this business line...
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...Introduction In an open economy, there are no impediments to trade. Goods and services flow freely between business and citizens in one country to their counter parts in another. This section discusses exchange rates, exchange rate adjustments and systems, macroeconomic policy in an open economy, as well as international banking, including international currency reserves, debt, and risk. Learning Materials Open Economy Macroeconomics: Exchange Rates, Balance of Payments and Policy Exchange-Rate Systems With some notable exceptions, most countries in the world have their own currency. Consequently, foreign exchange markets have developed to allow individuals, businesses, governments and other institutions to be able to make payment and receive payment across borders. Each country decides on an exchange rate system, whether they will set their exchange value of their currency administratively, allow markets to determine it, or some combination of those two approaches. Both macroeconomic and microeconomic forces influence the price of each currency in terms of another currency, its exchange rate. Exchange-rate systems include fixed, freely floating, managed floating, fixed peg, crawling-peg currency board, and dollarization. The United States, European Union, United Kingdom and Japan follow managed floating systems. Currency Boards and Monetary Policy Developing countries and small countries with large international sectors are more likely to use fixed systems, peg...
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...dollar has been the central reserve currency for the world. A reserve currency, also referred to as an anchor currency, is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves (Carbaugh, 2011). As the world’s reserve currency, the U.S. dollar is used throughout the world as a medium of exchange and is used as the global currency for products traded within the global market. In recent years the status of the U.S. dollar has been contested by a select few around the world. Leaders are unconvinced about the future of the United States economy as their deficits are exceeding record highs. The following analysis will discuss the history of the world reserve currency, how the U.S. dollar became the controlling currency and the benefits the U.S. has experienced as a result of having the controlling currency. Presenting analysis will also discuss the cause of mounting concerns over the future of the United States as well as the effects if the dollar was to lose its status as the world’s reserve currency. Finally, alternatives for the dollar will be evaluated as well as what the United States can do to maintain the standing of the dollar. History of World Reserve Currency During the 1800’s and the first half of the 1900’s the British Pound served as the foremost world reserve currency. Due to WWII Great Britain accrued a high amount of debt and lost its status as the world reserve currency. As the British Pound was decreasing...
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...relationship between individuals, economies and the global economy. All of the trade and financial relationships between countries are mediated through the exchange of currencies. Therefore any movements in the exchange rate affect international competitiveness, trade flows, investment decisions, inflation and may other factors. Exchange rates are the price of one currency in terms of another economy’s currency, which facilitate economic transactions between individuals firms and governments in different countries. The FOREX market refers to the market in which currencies are traded, where the forces of supply and demand determine the price of one country’s currency in terms of another. In December 1983, Australia switched from a managed flexible peg to a floating exchange rate system. This is regarded as one of the most significant structural changes that Australia has implemented, because it opened up the Australian economy to global financial flows. Under a floating exchange rate system the exchange rate is determined by the free play of market forces and not by government intervention, unlike the previous system of flexible peg where the RBA would ‘peg’ the value of the $A at 9am each day and that price would operate throughout the day. One way to measure the movements in the exchange rates is the Trade weighted Index (TWI) which measures the value of the $A against a basket of foreign currencies of major trading partners. These currencies are weighted according to their...
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...Introduction This research aims to highlight and focus on the Foreign Exchange Market as well as the Net International Reserves, their stabilizing methods and strategies, along with a discussion on the analysis and effects of the measures taken to attain success within the Jamaican economy. The foreign exchange market is defined as (main function) a market used for converting from one country’s currency to another using an exchange rate which determines the value of one country’s currency against another. The Jamaican foreign exchange market came to full liberalization in the 1990’s. Since then there has been much discussion on the efficiency of the market and the appropriateness of the foreign exchange rate. “The use of market microstructure models has become very popular in financial market research stemming from the inability of traditional macroeconomic models to adequately capture the short-term dynamics of financial markets” (Frankel and Froot, 1990).There have been concerns as to whether the foreign exchange rate correctly reflects the forces of supply and demand in the market. The role of the Bank of Jamaica when it pertains to foreign exchange market is market intervention, market surveillance and data collection and information dissemination; with particular attention paid to intervention. The secondary function of the foreign exchange market is to provide insurance against foreign exchange risk. Foreign exchange risk can be defined as any adverse consequence or unpredictable...
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...-------------(((((------------- SUBJECT INTRODUCTION TO BANKING AND FINANCIAL Value of VND compared with ASEAN member currencies? Facts LECTURE: TRAN LINH DANG STUDENTS OF TC201DE01-0100 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 2012 – 2013 -------------(((((------------- SUBJECT INTRODUCTION TO BANKING AND FINANCIAL Value of VND compared with ASEAN member currencies? Facts LECTURE: TRAN LINH DANG STUDENTS OF TC201DE01-0100 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 Note for faculty: Date: ___/___/___ For the writer: (Signature & full name) 2012 – 2013 CONTENTS CONTENTS i INTRODUCTION ii I. Exchange rates 1 I 1. Exchange rates 1 I 2. Exchange rate regimes 2 I 3. Roles of exchange rates 3 II. Compare and contrast between the value of VND and the others of ASEAN 5 II 1. The exchange rates in Vietnam from 2008 to 2010 6 II 2. The exchange rates in Vietnam in 2011 8 III. Impacts on exchange rates 10 III 1. Balance of Trade 10 III 2. Balance of Payments 11 III 3. Monetary Policy 12 III 4. Differentials in Inflation 12 III 5. Differentials in Interest Rates 12 III 6. Public Debt 12 III 7...
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...cross fertilization of ideas between academicians and practitioners through conferences and lectures, such as this one. • Facilitating the process of education for economic development. Summary of Presentation The W.D. Carter Lecture Series was held on September 18, 2013 in the Main Auditorium on the focus of the Foreign Exchange Market. It was brought across the audience that the Jamaican economy is in deep trouble due to the fact that the dollar is sliding rapidly. A discussion panel was formed with lecturers and a student from the Business Department. The foreign exchange market can be defined as the market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and investors. The determination of the foreign currencies are based on the exchanged rates due to the cause from inflation, interest rate, current account deficit, public debt, terms of trade, political stability and not to mention the performance of the economy itself. Depreciation of currencies occurs when a...
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...initiated. Foreign capital flows were not looked upon favorably & therefore not encouraged. If there is a deficit in the current account it was financed mainly through deft flows & official development assistance. The policy followed was one which discouraged foreign investment. However, the adverse balance of payment & the economic crisis faced by India forced India to adopt economic reforms. Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary. Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.1 Currency Convertibility means the ability to freely exchange the currency of one Member State into the currency of another Member State. For example, a Barbadian should be able to easily purchase goods in a store in Port of Spain with his Barbadian dollars and receive his change in Trinidad and Tobago dollars. However, this does not always happen because of the existence of two different exchange systems in CARICOM – Fixed and Floating. Currency convertibility...
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...The functions of the gold standard was to give the worth of a countries currency a true measurement of its worth. The countries participating would measure their currency against the worth of gold. Since gold was highly sought-after, it was a fair measurement of how a currency would hold its value. The gold standard came and went, over a matter of 100 years and is no longer used today. Arguments have been made for the return of the gold standard, to no avail the fall out in the late 1970’s still carries its weight. After World War II, the Bretton Woods agreement controlled the European and American economy, with the intentions of repairing damage after the war. Eventually, the strategy failed and thus gave way for the start of the foreign exchange market and the free-floating system. The gold standard began in the early 1800’s and was used as a measurement of the worth of currency. The idea was that as gold held a certain value according to the demand and supply of itself, the currency of a country would be worth a fraction of the worth of gold. For example, if one ounce of gold was worth $100 then one U.S. dollar would be worth 1/100th of an ounce of gold. It also kept a hold on any country from printing too much money, so that it would not lose its value over time. This measurement could also be used with any metal, as in the 1800’s silver was also a precious metal (Moffatt, n.d.). During the presidency of Franklin D. Roosevelt, in 1933 the gold standard had come...
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...Economics Economies of Scale Reduction in cost per unit resulting from increased production, realized through operational efficiencies. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls. Diseconomies of Scale “Economies of scale” is a simple concept that can be demonstrated through an example. Assume you are a small business owner and are considering printing a marketing brochure. The printer quotes a price of $5,000 for 500 brochures, and $10,000 for 2,500 copies. While 500 brochures will cost you $10 per brochure, 2,500 will only cost you $4 per brochure. In this case, the printer is passing on part of the cost advantage of printing a larger number of brochures to you. This cost advantage arises because the printer has the same initial set-up cost regardless of whether the number of brochures printed is 500 or 2,500. Once these costs are covered, there is only a marginal extra cost for printing each additional brochure. Economies of scale can arise in several areas within a large enterprise. While the benefits of this concept in areas such as production and purchasing are obvious, economies of scale can also impact areas like finance. For example, the largest companies often have a lower cost of capital than small firms because they can borrow at lower interest rates. As a result, economies of scale are often cited as a major rationale when two companies announce a merger or takeover. However...
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...good or bad? 8 Reasons for Currency Appreciation in Pakistan 8 Impact of Pak rupee appreciation on Economy of Pakistan 9 Impact on Sectors 13 Conclusion/ Recommendations 14 References 15 Introduction Exchange rate can be defined as rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates,inflation, and the state of politics and the economy in each country also called rate of exchange or foreign exchange rate or currency exchange rate. An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country's current account. Typically a forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency. The dollar has depreciated significantly against the rupee. As this has been a highly noticeable and largely unexpected event, it has raised a plethora of questions in the minds of citizens, and conspiracy theories have done the rounds. Yet dollar depreciation against the rupee is not as mysterious as it would appear if one understands the role of foreign currency reserves in deflating speculative...
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...Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates HKAS 21 COPYRIGHT © Copyright 2014 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial Reporting Standard contains IFRS Foundation copyright material. Reproduction within Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and inquiries concerning reproduction and rights for commercial purposes within Hong Kong should be addressed to the Director, Finance and Operation, Hong Kong Institute of Certified Public Accountants, 37/F., Wu Chung House, 213 Queen's Road East, Wanchai, Hong Kong. All rights in this material outside of Hong Kong are reserved by IFRS Foundation. Reproduction of Hong Kong Financial Reporting Standards outside of Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Hong Kong should be addressed to the IFRS Foundation at www.ifrs.org. Further details of the copyright notice form IFRS Foundation is available at http://app1.hkicpa.org.hk/ebook/copyright-notice.pdf © Copyright 2 HKAS 21 (July 2012May 2014) CONTENTS from paragraph INTRODUCTION IN1 HONG KONG ACCOUNTING STANDARD 21 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES OBJECTIVE 1 SCOPE 3 ...
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...different currency:- Foreign Currency trading. The origin of Foreign Exchange (Forex) trading traces its history to centuries ago. The Babylonians are credited with the first use of paper notes and receipts. However, during this phase of history Speculation hardly ever happened. During the middle ages, the introduction of a paper form of governmental I.O.U. gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion.These paper bills represented transferable third-party payments of funds, making foreign currency exchange trading much easier for merchants and traders and causing these regional economies to flourish. These I.O.U’s have now become the basis of today's modern currencies. From its infantile stages during the Middle Ages to First World war, the forex markets were relatively stable and without much speculative activity. During this phase, most Central banks supported their currencies with convertibility to gold. This standard had a major weakness called the ‘boom-bust’ pattern. As an economy strengthened (Boom), it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession (Burst). Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold...
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