Managing Exchange Rate

Question 1

Countrie that don’t have their own currency

Answer 1

• formal dollarization: utilise la monnaie d’un autre pays

-monetary union: plusieurs pays qui utilisent la même monnaie (monnaie européenne)

Question 2

Countrie that have their own currency

Answer 2

Currency board arrangement

Conventional fixed peg

Pegged exchange raises in a target zone

Crawling peg

Crawling brands

Managed floating exchange

Independent floating currency

Question 3

Countrie that have their own currency

Answer 3

Currency board arrangement

Conventional fixed peg

Pegged exchange raises in a target zone

Crawling peg

Crawling brands

Managed floating exchange

Independent floating currency

Question 4

Currency board arrangement

Answer 4

Explicit commitment to fix an exchange rate

Question 5

Conventional fixed peg

Answer 5

Country pegs its currency to within margins. +/- 1% to another currency

Direct intervention; monetary authority maintains the peg by buying and selling currencies in the FX markets

Indirect interventions: via monetary policy, local regulation of FX

Question 6

Pegged exchange rates in a target zone

Answer 6

The permitted currency fluctuation

Question 7

Crawling peg

Answer 7

Passive crawling peg: Suit le pays de référence (ajuste FX rate) periodically to allow for inflation

Active crawling peg: ajuste la politique monétaire pour avoir inflation pareil à pays de référence

Question 8

Crawling bands

Answer 8

The width of the bands indetify permissible échanges rate over time the wider the band, the greater the flexibility of monetary policy

Question 9

Managed floating exchange rates

Answer 9

Use economic indicators such as inflation rates, balance of payments, unemployment rate, intervention may be direct or indirect ( acheter ou vendre sa propre devise sur le marché pour al faire augmenter ou diminuer )

Question 10

Indépendant floating currency

Answer 10

Market determine the exchange rate

Foreign market intervention is o my used to slow the rate of change and reduce short term fluctuations,
No spécific target level for exchange rates

Question 11

Exchange rates: Imports and exports

Answer 11

exchange rate decreased: export are more expensive and fall (numérateur) et dénominateur import become cheaper and rise (ex: usd/euro)

Question 12

Objectives of capital restrictions

Answer 12

Reduce volatility

Maintain fixed exchange rates

Keep domestic interest rates low

Protect strategic industries for national securities

Quand ça va mal argent sort et bien argent rentre

Question 13

Trade deficit

Answer 13

Import > export

X - M <0