International Financial System

Front 1

_______________ is where the central banks regularly engage in international financial transaction, to _________ (reason)

Back 1

Foreign exchange intervention

Influence exchange rates

Front 2

Holding of assets denominated in foreign currency, which are different from the reserves in the banking system, the deposits banks keep in their local Federal Reserve banks

Back 2

International Reserves

Front 3

Sale of International reserves is, in effect, _______

Back 3

a purchase of dollars held by banks in their reserves accounts and thus usually referred to as purchase of dollar

Front 4

Effects of Fed's sale of international reserves

Back 4

1. It reduces the Fed's holding of International reserves by 1 Billion

2. Sale of international reserves is, in effect, a purchase of dollars held by banks in their reserve accounts and is thus usually referred to as purchase or dollars

Front 5

A Fed purchase of dollars and corresponding sale of foreign assets in the foreign exchange market leads to

Back 5

an equal decline in its international reserves and in reserves (banks' deposits at the Fed)

Front 6

A central bank's sale of domestic currency to purchase foreign assets in the foreign exchange market results in

Back 6

an equal rise in its international reserves and reserves in the banking system

Front 7

What are the 2 types of intervention

Back 7

1. Unsterilized foreign exchange intervention

2. Sterilized foreign exchange

Front 8

What is unstefilized foreign exchange intervention?

Back 8

-a central bank allows the purchase or sale of domestic curreny to have an effect on reserves

-to counter the effect of the foreign exchange intervention by conducting an offsetting open market operation in the government bond market

Front 9

What is sterilized foreign exchange intervention

Back 9

Offsetting open market operation that leaves unchanged

Front 10

It is where the domestic currency is bought and foreign asset are sold leads to a fall in international reserves, fall in reservea, a rise in domestic interest rates and an appreciation of the domestic currency

Back 10

Unstefilized intervention

Front 11

Central bank engages in offseffing open market operations, so that there is no impact on reserves

Back 11

Strerilized Intervention

Front 12

No effect on the exchange rate

Back 12

Sterilized Intervantion

Front 13

It shows the international transaction that involve current flows of funds and out of the country

Back 13

Current account

Front 14

Trade balance/Merchandise trade balance

Back 14

Diff b/w merchandise trade export and imports, the net receipts from trade

Front 15

If exports are greather than import

> import

Back 15

Trade deficit

Front 16

Net exports

Back 16

The balance of trade in both goods and services

Front 17

Net receipt from investment income

Back 17

Investment income received from aboard...

Front 18

Tell us whether the a nation like United States is increasing or decreasing its claims on foreign wealth

Back 18

CURRENT ACCOUNT

Front 19

Has a positive net receipt on a current basic, thus is increasing its claims on foreign wealth more foreign assets

Back 19

Current Account Surplus

Front 20

Has a negative net receipt on a current basis and must finane them by borrowing abroad and thus reducing its claim on foreign wealth by increasing foreigners' claim on the nation

Back 20

Current account deficit

Front 21

Summary of economic transaction of a country and the rest of the world for a specific period of time

Back 21

Balance of Payments

Front 22

Serves as an accounting statement of economic dealings b/w resident of the country and non- resident

Back 22

Balance of Payments

Front 23

One who stayed and intend to stay in the country for one year or more

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Resident of the country

Front 24

Total exports/receipts exceeds the import/payments

Back 24

Surplus

Front 25

Total imports/payments exceeds the total exports/receipt

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Deficit

Front 26

User of funds

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Deficit

Front 27

Net lender

Back 27

Surplus

Front 28

Country invested more than what its national savings can finance

Back 28

Deficit

Front 29

The national savings is more than the country’s investment in real assets

Back 29

Surplus

Front 30

grants and donation intends for investment (equipment, machinery)

Back 30

Capital transfer

Front 31

Grants and donation under current account balance is for

Back 31

Consumption---- food

Front 32

Capital participation in a country in which the investor has lasting and permanent interest

Back 32

Direct investment

Front 33

Refers to hot money

Back 33

Portfolio investment

Front 34

What investment is where investor's motive is for short term

Back 34

Portfolio Investment - "hot money"

Front 35

In the form of stock, bonus & notes & money market instruments tradable in the market, can easily be acquired or disposed

Back 35

Portfolio holdings

Front 36

GIR stands for

Back 36

Gross international reserves

Front 37

It refers to the gross international reserves

Back 37

International reserves

Front 38

GRI serves as _______ at will finance the deficit of combined current and capital and finance transaction

Back 38

Standby funds

Front 39

Bretton woods sets up the international bank for reconstruction and development, commonly referred to

Back 39

World Bank

Front 40

______ helps developing countries build dams, road and other physical capital that would contribute to their economic development

Back 40

World Bank

Front 41

What are the 3 options

Back 41

Option 1 - US

Option 2 - Hong Kong

Option 3 - China

Front 42

The impossible and inconsistent trinity refers to ___________ because a country can only have 2 out of 3 possible

Back 42

POLICY TRILEMMA

Front 43

What are the 3 policy trilemma

Back 43

1. Free Capital Mobility

2. Fixed exchange rate

3. Independent monetary policy

Front 44

to enable an efficient crossborderdeployment of physical and financial capital for investment and financing purposes

Back 44

Free capital mobility

Front 45

__________ measures as a country’s ability to conduct its own monetary policyfor domestic purposes independent of external monetary influences. Leads to ________.

Back 45

Independent Monetary Policy

lower consumer price inflation

Front 46

Provides long term loans to help developing countries build dams, roads, and other physical capital that contribute to the development of their economic development

Back 46

World bank or the international bank for reconstruction and development

Front 47

What is GATT stands for

Back 47

General Agreement on tariff & trade

Front 48

To monitor rules for the conduct of trade b/w countries

Back 48

GATT

Front 49

Monetary Union also refers to __________

Back 49

Currency Union

Front 50

It involves irrevocable fixation of the exchange rates of the national currencies existing before the formation of a monetary union

Back 50

Monetary Union

Front 51

Is an agreement b/w two or more states creating a single currency area

Back 51

Currency union/Monetary Union

Front 52

currency of a country attempting to maintain a fixed,or pegged exchange rate

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Speculative Attack

Front 53

If the country does not hold enough foreign currency reserves to buy enough of its domestic currency

Back 53

Speculative Attack

Front 54

Is a floating exchange rate where a country's central bank occasionally intervenes to change the direction or the pace of change of a country'scurrency value

Back 54

Managed float

Front 55

Capital Outflows

Back 55

The movement of assets out of a country

Front 56

Inflow

Back 56

Movement of assets into a country

Front 57

a country abandons its currency altogether and adopts that of another countryb

Back 57

Dollarization

Front 58

Is a floating exchange rate where a country's central bank occasionally intervenes to change the direction or the pace of change of country's currency value

Back 58

Managed Float

Front 59

Kept or invested in other countries during a particular period

Back 59

Capital outflow

Front 60

Movement of money for the purpose of investment trade or business operations

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Capital inflows

Front 61

Is a facility prepared to act when no other lender is capable or willing to lend in sufficient volume to provide or guarantee liquidity in order to avert a sovereign debt crisis or a systemic crisis

Back 61

International lender of last resort

Front 62

ILLR stands for

Back 62

International lender of last resort