International Finance

International Finance - International Finance From Last...

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International Finance From Last Time Why would the Federal Reserve sterilize a change it just made? The Fed intervenes in the foreign exchange market to influence the value of the dollar against foreign currencies. If the Fed does not want what it does to the foreign exchange value of the dollar affect the size of the U.S. money supply it will offset the effects, that is, sterilize. Is foreign exchange market intervention one of the reasons 50-78% of U.S. currency is held abroad? Yes. If foreign governments want to intervene in the foreign exchange market to influence the value of their currency versus the dollar, they need to hold dollars. Who's inflation rate is more volatile: the foreign inflation rate or ours? It depends on who you compare the U.S. against. Ours is more volatile than Germany's but less volatile than Italy's. Balance of Payments An open economy engages in international trade and international borrowing and lending. A country's spending need not equal its production in every period. By importing more than it
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This note was uploaded on 11/22/2011 for the course FIN FIN1100 taught by Professor Bradrifkin during the Fall '09 term at Broward College.

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International Finance - International Finance From Last...

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