--%>
Assignment Help - homework help

Implications of fixed and flexible exchange rate regimes

Explain “balance of payments” identity and discuss some of its implications under the fixed and flexible exchange rate regimes.

E

Expert

Verified

Balance of payments identity states that the joint balance on the current and capital accounts must be same as its size, however opposite in the sign, to the change in the official reserves: BCA + BKA = -BRA. Under the pure flexible exchange rate regime, the central banks never engage in the official reserve transactions. Hence, overall balance should balance, i.e., BCA = -BKA. Under fixed exchange rate regime, though, a country may have overall BOP surplus or deficit as central bank can accommodate it via the official reserve transactions.

   Related Questions in Financial Accounting

  • Q : Relative and absolute purchasing power

    Explain about the purchasing power parity, both the relative and absolute versions. List the things which results in the deviations from purchasing power parity?

    		•
  • Q : Case study of a global economy The

    The economic recovery is seemingly on track and in fact strengthened during the first half of 2010. The global financial market however, suffered a setback with the turmoil in sovereign debt markets leading to sharp currency movements. The extent of recovery varies ac

    		•
  • Q : Computing cross-rate matrix Compute

    Compute cross-rate matrix for French franc, Japanese yen, German mark, and the British pound. Utilize most recent European term quotes in order to compute the cross-rates in order that the triangular matrix result is same as that of the portion above diagonal in Exhib

    		•
  • Q : International and financial management

    Explain, how international financial management is different from the domestic financial management?

    		•
  • Q : Portfolio of Sharemarket SHAREMARKET

     SHAREMARKET ASSIGNMENT SHEET  - Select a share portfolio consisting of one company from each group listed above. The total value of your portfolio should add up to

  • Q : Partner Reflection HRD Programs If you

    If you are working with a partner for your assignment, please answer the following questions individually and submit your paper separately.1. Why did you want to work together? 2. How did you di

    		•
  • Q : What do you mean by the term turnover

    What do you mean by the term turnover?

    		•
  • Q : Balance of payments deficit or surplus

    Describe how country may run an overall balance of payments deficit or surplus.

    		•
  • Q : Closed-end country funds trading at

    Why closed-end country funds often trade at the premium or discount?

    		•
  • Q : Matlab Applications in Communication

    Communication system is the discipline in engineering curriculum which is more of the conceptual rather than theoretical. Mainly student faces trouble in understanding the core concepts of this topic. We have team of highly competent and prac

    		•