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How would each of the following transactions show up on the U.S. balance-of-payments accounts?
The Bank of Japan buys up $1 billion in the foreign exchange market to hold down the value of the yen and uses these dollars to buy U.S. Treasury bonds.
Assuming the preceding data are measured with precision, what can you conclude about the change in Japan’s foreign exchange reserves during the year?
What explanations have been given for the decline of the euro in the first three years of its existence?
What would be the economic consequences of the combined $5/barrel tariff on imported crude and a $10/barrel tariff on refined oil products?
At the time President Carter made his remarks, the inflation rate was running at about 10% annually and accelerating as the Federal Reserve.
What were the likely consequences of the slowdown in U.S. economic growth for the value of the dollar? The U.S. trade balance?
Under which circumstances can purchasing power parity be applied? What are some reasons for deviations from purchasing power parity?
One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates.
Comment on the following statement. ‘‘It makes sense to borrow during times of high inflation because you can repay the loan in cheaper dollars.’’
How would you characterize the real interest rates of Peru and Chile (e.g., close to zero, highly positive, highly negative)?
From 1982 to 1988, a number of countries (e.g., Pakistan, Hungary, Venezuela) had a small or negative interest rate.
The wide difference between Japanese and U.S. interest rates prompted some U.S. real estate developers to borrow in yen to finance their projects.
In early 1990, Japanese and German interest rates rose while U.S. rates fell. At the same time, the yen and DM fell against the U.S. dollar.
The spot rate on the euro is $1.39, and the 180-day forward rate is $1.41. What are possible reasons for the difference between the two rates?
In 1993 and early 1994, Turkish banks borrowed abroad at relatively low interest rates to fund their lending at home.
From base price levels of 100 in 2000, Japanese and U.S. price levels in 2003 stood at 102 and 106, respectively.
What are competitive currency devaluations? What triggered them in 2003?
Commentators pointed to the fact that many people in Britain have variable rate mortgages, as opposed to the fixed-rate mortgages.
What happened to Irish debt? To Irish bond ratings? Interest rates? How did the Irish crisis highlight problems with the Eurozone?
Have exchange rate movements under the current system of managed floating been excessive? Explain.
Suppose nations attempt to pursue independent monetary and fiscal policies. How will exchange rates behave?
Under the former 2.25% margin on either side of the central rate, what were the approximate upper and lower intervention limits for France and Germany?
The experiences of fixed exchange rate systems and targetzone arrangements have not been entirely satisfactory.
How did the European Monetary System limit the economic ability of each member nation to set its interest rate to be different from Germany’s?