tailieunhanh - Lecture International financial management - Chapter 6: Government influence on exchange rates

Chapter 6 describe the exchange rate system used by various governments, describe the development and implications of a single European currency, explain how governments can use direct intervention to influence exchange rates, explain how government intervention in the foreign exchange market can affect economic conditions. | 1 1 2 Part 2 Exchange Rate Behavior 3 6 Government Influence on Exchange Rates Describe the exchange rate system used by various governments Describe the development and implications of a single European currency Explain how governments can use direct intervention to influence exchange rates Explain how government intervention in the foreign exchange market can affect economic conditions 3 Chapter Objectives 3 4 Exchange Rate Systems Exchange rate systems can be classified according to the degree of government control and fall into the following categories: Fixed Freely floating Managed float Pegged 5 Fixed Exchange Rate System Exchange rates are either held constant or allowed to fluctuate only within very narrow boundaries. Central bank can reset a fixed exchange rate by devaluing or reducing the value of the currency against other currencies. Central bank can also revalue or increase the value of its currency against other currencies. 6 Fixed Exchange Rate System Examples: Bretton Woods Agreement 1944 – 1971 - Each currency was valued in terms of gold. Smithsonian Agreement 1971 – 1973 - called for a devaluation of the . dollar by about 8 percent against other currencies. Advantages of fixed exchange rate system Insulate country from risk of currency appreciation. Allow firms to engage in direct foreign investment without currency risk. Disadvantages of fixed exchange rate system Risk that government will alter value of currency. Country and MNC may be more vulnerable to economic conditions in other countries. 7 Freely Floating Exchange Rate System Exchange rates are determined by market forces without government intervention. Advantages of freely floating system: Country is more insulated from inflation of other countries. Country is more insulated from unemployment of other countries. Does not require central bank to maintain exchange rates within specified boundaries. Disadvantages of freely floating system: Can adversely affect a country that has high . | 1 1 2 Part 2 Exchange Rate Behavior 3 6 Government Influence on Exchange Rates Describe the exchange rate system used by various governments Describe the development and implications of a single European currency Explain how governments can use direct intervention to influence exchange rates Explain how government intervention in the foreign exchange market can affect economic conditions 3 Chapter Objectives 3 4 Exchange Rate Systems Exchange rate systems can be classified according to the degree of government control and fall into the following categories: Fixed Freely floating Managed float Pegged 5 Fixed Exchange Rate System Exchange rates are either held constant or allowed to fluctuate only within very narrow boundaries. Central bank can reset a fixed exchange rate by devaluing or reducing the value of the currency against other currencies. Central bank can also revalue or increase the value of its currency against other currencies. 6 Fixed Exchange Rate System Examples: Bretton

• Tài chính doanh nghiệp
• International financial management
• Quản lý tài chính quốc tế
• Lecture International financial management
• Exchange rates
• Exchange rate systems
• Pegged exchange rate system
• International financial markets
• Foreign exchange market
• International money market
• Financial statement
• International trade transactions
• Financial management
• Fundamentals of financial management
• Financial statement analysis
• International bond market
• International equity markets
• International trade finance
• Multinational cash management
• International equity financing
• International capital market equilibrium
• International capital budgeting
• The foreign currency hedging decision
• International banking
• Money market
• International portfolio investment
• Balance of payments
• Current account
• Financial accounts
• International flow of funds
• Exchange rate determination
• Government influence
• Currency derivatives
• International tax environment
• Financial environments
• Bài giảng International financial management
• Tài chính quốc tế
• Multinational financial management
• Tăng trưởng của MNCs
• Direct foreign investment
• Multinational capital budgeting
• Financing international trade
• International cash management
• Lesson International financial management
• Management of translation exposure
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• Alternative currency translation methods
• Translation exposure
• International business
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• International operations management
• International strategic management
• International strategic alliances
• International Fisher Effect
• Purchasing power parity
• International diversification
• International project
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• Lecture International business
• International environmental forces
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• Financial management decisions
• International flow
• International arbitrage
• Interest rate parity
• Relationships among inflation
• International monetary system
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• Forecasting foreign exchange rates
• International financial
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• Country risk analysis
• Lecture Multinational financial management
• International banking and money market
• International banking services
• Capital adequacy standards