CH0: International Monetary System Flashcards
exchange rate also called
spot exchange rate
traditional method for IMS
common standard
commodities used as intl. standard
gold, silver, bronze, seashells, salt
(during gold standard era) gold made up ____ of the intl. reserves of a country
all
balance of payments
balance of all monetary flows in and out of a country
cons of the gold standard
deficit in balance of payments; outflow of gold; reduction in domestic reserves/reduction in domestic money supply; prices of goods fell; interest rates rose
pros of the gold standard
higher interest rates attracted foreign capital; low prices increased competition; these both replenished gold reserves
problems w gold standard
rigidity; economic GR became larger than physical growth in gold reserves; no flexible monetary policy; led to severe shocks in domestic economies with disequilibrium of balance of payments
bretton woods system aka
gold exchange standard
bretton woods objectives (2)
- enlargement of intl. reserves; 2. stable but adjustable exchange rates or pegged exchange rates
pegged exchange rates
ER are semifixed around official parities set in global cooperation
currency board
the exchange rate is fixed + the supply of domestic currency is fully baked by an equivalent amount of US dollars
country that maintains total commitment to maintaining a parity of their currency with the US dollar?
HK
eurozone countries
austria, belgium, finland, frnace, germany, greece, ireland, italy, luxembourg, netherlands, portugal, slovenia, spain
legacy rates
fixed exchange rates of the eurozone countries
