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27 Cards in this Set
- Front
- Back
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Adjustable pegged exchange rates
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a system of semifixed exchange rates where it is understood that the par value of the currency will be changed occasionally in response to changing economic conditions
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bretton woods system
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a new international monetary system created in 1944 by delegates from 44 members nations of the United Nations that met at Bretton Woods New Hampshire
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capital controls
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government imposed barriers to foreign savers investing in domestic assets or to domestic savers investing in foreign assets
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clean float
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when free market forces of supply and demand are allowed to determine the exchange value of a currency
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crawling peg
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a system in which a nation makes small, frequent changes in the par value of its currency to correct balance of payments disequilibrium
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currency board
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a monetary authority that issues notes and coins convertible into a foreign anchor currency at a fixed exchange rate
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currency crashes
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financial crises that often end in currency devaluations or accelerated depreciations
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currency crisis
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a situation in which a weak currency experiences heavy selling pressure, also called a speculative attack
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devaluation
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an official change in a currency's par value, which causes the currency's exchange value to depreciate
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dirty float
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a condition under a managed floating system when free market forces of supply and demand are not allowed to achieve their equilibrating role; countries may manage their exchange rates to improve the competitiveness of their producers
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dollarization
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occurs when residents of a foreign country use the U/S/ dollar alongside or instead of their domestic currency
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exchange controls
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government imposed barriers to foreign savers investing in domestic assets or to domestic savers investing in foreign assets
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exchange stabilization fund
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a government entity that attempts to ensure that the market exchange rate does not move above or below the official exchange rate through purchases and sales of foreign currencies
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fixed exchange rates
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a system used primarily by small developing nations whose currencies are anchored to a key currency, such as the U.S. dollar
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floating (or flexible) exchange rates
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when a nation allows its currency to fluctuate according to the free market forces of supply and demand
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fundamental disequilibrium
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when the official exchange rate and the market exchange rate may move apart, reflecting changes in fundamental economic conditions--income levels, tastes and preferences, and technological factors
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impossible trinity
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a restriction whereby a country can maintain only two of the following three policies-- free capital flows, a fixed exchange rate, and an independent monetary policy
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key currency
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a currency that is widely traded on world money markets, has demonstrated relatively stable values over time, and has been widely accepted as a means of international settlement
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leaning against the wind
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intervening to reduce short term fluctuations in exchange rates without attempting to adhere to any particular rate over the long run
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managed floating system
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an exchange rate system in which the rate is usually allowed to be determined by the free market forces of supply and demand, while sometimes entailing some degree of government intervention
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official exchange rate
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the exchange rate determined by comparing the par values of two currencies
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par value
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a central value in terms of a key currency that governments participating in a fixed exchange rate system set their currencies
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revaluation
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an official change in a currency's par value, which causes the currency's exchange value to appreciate
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seigniorage
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profit from issuing money
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special drawing right
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an artificial currency unit based on a basket of four currencies established by the IMF
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speculative attack
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a situation in which a weak currency experiences heavy selling pressure
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target exchange rates
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desired exchange rates for a currency set by the host country and supported by intervention
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