Global EconomicEnvironment of the Firm
Macro Economics
Monetary Policy and Exchange Rate Regimes
The questions should be answered using Macro Economic arguments using graduate level thinking. Please pay attention to the questions asked. More detail, the better.
Questions: The article argues that, ``the rigidity of the currency board made it difficult to respond to these shocks." You should think of the currency board simply as a fixed exchange rate regime.
(i) What are the restrictions that the currency board imposes on economic policy, which makes it difficult to respond to external shocks?
(ii) If Argentina was not on a currency board what could it have done to respond to the external shocks of rising cost of capital, and the fact that Brazil, Argentina's main trading partner had devalued its currency?
(i) What are the restrictions that the currency board imposes on economic policy, which makes it difficult to respond to external shocks?
A currency board is a fixed exchange rate regime. By fixing the exchange rate the Central bank gives up its ability to influence the economy through monetary policy.
Suppose the central bank wants to increase the output and give a boost to the economy in the short run by lowering the interest rate. Thus it increases the money supply through a purchase of domestic assets. Under a floating exchange regime this would cause a depreciation of the domestic currency. However in a fixed exchange regime the central bank would not ...
Solution Summary
The solutions answers 2 questions on currency board and external shocks.
... independent states such as Lithuania, Estonia and Bosnia have implemented currency board-like systems ... 3 had very hard pegs in the form of currency boards or no ...
... Equity is the money raised by a company in return for a share of ... Investors would also demand presence on board of directors and involvement in management and ...
... analysts reviewed the ory requires time and money to gather ... for the benefit of a few...the Board as proposed ... Did the boards consider the com- an entity's "core ...
... makes money for operating the game, except as a player, or games operated by charitable or educational organizations which are approved by the board pursuant ...
... based on how far out of the money the call ... broker-dealer auditors were not subject to Boards jurisdiction previously ... can be a challenge for the Board, given the ...
... it may require a devaluation of its currency, making its ... although only a minority of most boards, usually vote ... block voting strength on the board is augmented ...
... bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Board of Governors ...
... expenses, such as for converting foreign currency into US ... Many boards are "puppet" boards and often play along ... The board should be the pillar which holds the ...
... Online My Dad created Wal-Mart to help people save money so they ... for electronic delivery of Annual Rob Walton, Chairman of the Board Shareholders' Meeting ...
