Chap028

Chap028 - Chapter 28 Fixed or Flexible Exchange Rates?...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 28 – Fixed or Flexible Exchange Rates? CHAPTER 28 FIXED OR FLEXIBLE EXCHANGE RATES? Learning Objectives: To learn the differing impacts of fixed and flexible exchange rates on international trade, international investment, and resource allocation. To grasp how the macroeconomic responses to foreign and domestic shocks are influenced by the exchange rate system in place. To recognize the advantages and disadvantages of a currency board. To understand the strengths and weaknesses of exchange rate systems that combine elements of both fixed and flexible exchange rates. 28-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 28 – Fixed or Flexible Exchange Rates? I. Outline Introduction - Slovenia’s Changeover to the Euro – A Clear Success. Central Issues in the Fixed-Flexible Exchange Rate Debate - Do Fixed or Flexible Exchange Rates Provide for Greater “Discipline” on the Part of Policymakers? - Would Fixed or Flexible Exchange Rates Provide for Greater Growth in International Trade and Investment? - Would Fixed or Flexible Exchange Rates Provide for Greater Efficiency in Resource Allocation? - Is Macroeconomic Policy More Effective in Influencing National Income under Fixed or Flexible Exchange Rates? - Will Destabilizing Speculation in Exchange Markets Be Greater under Fixed or Flexible Exchange Rates? - Will Countries Be Better Protected from External Shocks under a Fixed or a Flexible Exchange Rate System? Currency Boards - Advantages of a Currency Board - Disadvantages of a Currency Board Optimum Currency Areas Hybrid Systems Combining Fixed and Flexible Exchange Rates - Wider Bands - Crawling Pegs - Managed Floating Summary II. Special Chapter Features In The Real World: Exchange Risk and International Trade In The Real World: Reserve Holdings under Fixed and Flexible Exchange Rates Titans of International Economics: Milton Friedman (1912-2006) In The Real World: “Insulation” with Flexible Rates – The Case of Japan In The Real World: Currency Boards in Estonia and Lithuania In The Real World: A Crawling Peg in Colombia 28-2
Background image of page 2
Chapter 28 – Fixed or Flexible Exchange Rates? III. Purpose of Chapter The purpose of this chapter is to bring together in one place various issues surrounding the fixed-flexible exchange rate debate, and to survey some hybrid systems of fixed and flexible rates. The material builds upon points made in earlier chapters and prepares the students for the discussion of actual international monetary systems in the next chapter. IV. Teaching Tips A. The choice of an appropriate exchange rate regime is critical for many developing countries. Often faced with non-responsive economic systems and institutional rigidities, they experience domestic inflation problems that cannot be effectively overcome. In such an environment, tying the home currency to a major currency such as the dollar or euro or yen is very tempting. The case of Slovenia’s “Big Bang” approach to changing over to the euro is a
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/27/2009 for the course ECON 421 taught by Professor Macphee,c during the Spring '08 term at UNL.

Page1 / 12

Chap028 - Chapter 28 Fixed or Flexible Exchange Rates?...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online