tailieunhanh - Lecture Multinational financial management: Chapter 3 - Ngo Thi Ngoc Huyen

Chapter 3 "International Monetary Market" lecture Multinational financial management introduce to you the content: History of the international monetary system, eurocurrencies and their markets, different exchange rate regimes,. | IE GOALS OF CHAPTER 3 Introduce the history of the international monetary system from the gold-standard system Bretton Woods agreement to modern international monetary systems Introduce the Eurocurrencies and their markets Compare different exchange rate regimes Introduce the capital mobility the content in Ch 4 Analyze the exchange rate regimes for emerging markets currency boards and dollarization Introduce the history of the Euros Analyze the tradeoffs for international monetary systems over the years OF THE INTERNATIONAL MONETARY SYSTEM 1 OF THE INTERNATIONAL MONETARY SYSTEM The classical gold standard system 1876-1913 - Rules of the game were simple each country sets the rate at which its currency could be converted to a weight of gold or said to set the par value for its currency in terms of gold For the . and the . and can exchange for an ounce of gold so the dollar pound exchange rate was ounce of gold ounce of gold - Since each government agreed to buy or sell gold with anyone at its announced rate so exchange rates between currencies were in effect fixed Maintaining adequate reserves of gold to back its currency s value was very important for a country under this system - The system implicitly limits the rate at which any individual country could expand its monetary supply Any growth in the amount of money was limited to the rate at which official authorities could acquire addition gold OF THE INTERNATIONAL MONETARY SYSTEM - The gold standard system can adjust the balance of payments BOP by itself Surplus in BOP increase of reserves of gold government increases monetary supply expansionary monetary policy IRị international capital outflows price levelf decrease of export and increase of import decrease cash inflow to reduce the surplus in BOP Deficit in BOP decrease of reserves of gold government decreases monetary supply contractionary monetary policy IRf attract international capital price levelf increase of export