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How are foreign exchange transactions among international banks settled?The interbank market is network of correspondent banking relationships, along with large commercial banks maintaining demand dep
Define market participants in the foreign exchange market?The market participants which comprise the FX market can be categorized in five groups: international banks, non-bank dealers, bank customers
Describe difference between the retail or client market and the wholesale or interbank market for foreign exchange?The market for foreign exchange can be distinguished as two-tier market. One tier is
Define market for foreign exchange.Broadly described, the foreign exchange (FX) market encompasses the conversion of purchasing power from one currency to another, bank deposits of foreign currency, t
Describe balance of payments identity and explain its implication under the fixed & flexible exchange rate regimes.The balance of payments identity holds that the combined balance on the current &
Describe how to calculate the overall balance and discuss its significance.The overall BOP is finding out by computing the cumulative balance of payments by including the current account, capital acco
Describe official reserve assets & its major components.Official reserve assets are those financial assets which can be utilized as international means of payments. At present, official reserve as
Explain how a country can run net balance of payments deficit or surplus.A country can run net BOP deficit or surplus by engaging in the official reserve transactions. For instance, an overall BOP def
Remark on the following statement: "As the U.S. imports more than it exports, it is essential for the U.S. to import capital from foreign countries to finance its present account deficits."The stateme
On the contrary to the U.S., Japan has felt continuous current account surpluses. What could be the foremost causes for these surpluses? Is it desirable to have continuous current account surpluses?
The United States contain experienced continuous present account deficits since the early 1980s. What do you think are the foremost reason for the deficits? What would be the consequences of continuou
Why would it be useful to inspect a country's balance of payments data?It would be useful to inspect a country's BOP for at least two reasons. Firstly, BOP provides detailed information regarding the
Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4 Described the balance of payments. The balance of payments (BOP) can be described as the
Describe criteria for a ‘good' international monetary system.A good international monetary system have to provide (I) adequate liquidity to the world economy, (ii) smooth adjustments to BOP di
In integrated world financial market, a financial crisis in a country can be quickly transmitted to other countries, causing global crisis. What sort of measures would you suggest to stop the recurren
Criticize the flexible exchange rate regime from the point of view of the proponents of the fixed exchange rate regime. If exchange rates are randomly fluctuating, that may discourage international t
Tabulate the advantages of the flexible exchange rate regime. The advantages of the flexible exchange rate system comprise: (I) automatic attainment of balance of payments equilibrium and (ii) main
Describe the arrangements & workings of the European Monetary System (EMS).EMS was launched in the year of 1979 in order to (I) set up zone of monetary stability in Europe, (ii) coordinate exchang
Describe how the special drawing rights (SDR) are constructed. Also, discuss the situation under which the SDR was build.SDR was created by the IMF in the year of 1970 as a new reserve asset, partiall
One can state that the Bretton Woods system was programmed to an eventual demise. Remark on this proposition.The answer to this question is associated to the Triffin paradox. Under gold-exchange syste
Describe basic objectives of the Bretton Woods system?The basic objectives of the Bretton Woods system are to attain exchange rate stability and promote international trade & development.
Described the advantages & disadvantages of the gold standard. The advantages of the gold standard comprise: (I) as the supply of gold is limited, countries cannot comprise high inflation; (2) an
Assume that the pound is pegged to gold at 6 pounds per ounce, while the franc is pegged to gold at 12 francs per ounce. Of course it implies that the equilibrium exchange rate ought be two francs per