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20 Cards in this Set
- Front
- Back
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devaluation
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intentionally lowering the value of a nation's currency
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revaluation
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intentionally raising the value of a nation's currency
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law of one price
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principle that an identical item must have an identical price in all countries when the price is expressed in a common currency
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fisher effect
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principle that the nominal interest rate is the sum of the real interest rate and the expected rate of inflation over a specific period
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international fisher effect
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principle that a difference in nominal interest rates supported by two countries' currencies will cause an equal but opposite change in their spot exchange rates
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efficient market view
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view that prices of financial instruments reflect all publicly available information at any given time
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inefficient market view
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view that prices of financial instruments do not reflect all publicly available information
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fundamental analysis
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technique that uses statistical models based on fundamental economic indicators to forecast exchange rates
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technical analysis
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technique that uses charts of past trends in currency prices and other factors to forecast exchange rates
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international monetary system
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collection of agreements and institutions that govern exchange rates
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gold standard
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international monetary system in which nations linked the value of their paper currencies to specific values of gold
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fixed exchange-rate system
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system in which the exchange rate for converting one currency into another is fixed by international agreement
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bretton woods agreement
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agreement among nations to create a new international monetary system based on the value of the US dollar
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fundamental disequilibrium
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economic condition in which a trade deficit causes a permanent negative shift in a country's balance of payments
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special drawing right
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IMF asset whose value is based on a "weighted basket" of four currencies
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smithsonian agreement
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agreement among IMF members to restructure and strengthen the international monetary system created at bretton woods
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jamaica agreement
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agreement among IMF members to formalize the existing system of floating exchange rates as the new international monetary system
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managed float system
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exchange-rate system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates
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free float system
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exchange-rate system in which currencies float freely against one another, without governments intervening in currency markets
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currency board
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monetary regime that is based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate
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