International Business Funvtions
International Business Funvtions
Monetary System
Global and International & Trade
Prof. Alfred Lositaño
Group 7
Learning Objectives
After reading this chapter, you will be able to:
Types of Exchange
Dirty Fixed Rate Systems
Float Exchange
System Rate
Reporter
The International Monetary System
Reporter
Floating exchange rates can help
countries recover from economic
crises by making exports more
competitive.
Crisis Recovery with
Floating Exchange
This is because when a country's
Rates currency declines, it makes its
exports cheaper for foreign buyers.
Monetary
Discipline with Governments cannot expand their
Fixed Exchange money supplies at inflationary rates
without causing their currency to
Rates depreciate.
Speculation and
Floating Exchange
This can damage a country's
Rates economy by distorting export and
import prices.
Uncertainty and
Floating Exchange
This uncertainty can make it difficult
Rates to plan for international trade and
investment.
Pegged
Exchange Rates Pegged exchange rates impose
monetary discipline and lead to low
inflation.
Prominent instances Hong Kong did this This helped Hong In late 1997, interest
of this system can with the U.S. dollar. Kong during a crisis rates in Hong Kong
be observed in For every 7.80 Hong in 1997 when other even reached 20
Hong Kong, Estonia, Kong dollars = 1 U.S Asian currencies percent because people
and Bulgaria. dollar. were losing value. wanted U.S. dollars.
In 1997, the IMF gave over During the global financial In 2009, the IMF's
$110 billion to three crisis in 2008, the IMF gave
members agreed to
troubled Asian countries - more than $100 billion in
South Korea, Indonesia, loans to countries like Latvia, increase its resources
and Thailand. Greece, and Ireland. to $750 billion.
Lack of Accountability
Observations
Currency Management
Business Strategy
Strategic Flexibility
Corporate-Government Relations
Group 7