How Can A Country Be Regarded As Developed Or Underdeveloped

4. Explain the meaning of “strong” currency and “weak” currency. What are the advantages and disadvantages of each?

(1) Explain what the Stable-Monetary-Unit Assumption is (10 points) and (2) provide an example of its application. (10 points)

3) Purchasing power parity and the exchange rate in the long run (how exchange rate is

country is not an indebted country, say like the US. So, the currency has tended to

Exchange rates play a pivotal role in the relationships between individual economies and the global economy. Almost all financial flows are processed through the exchange rate, as a result the movements and fluctuations of the exchange have a significant impact on international competitiveness, trade flows, investment decisions and many other factors within the economy. Due to the increasing globalisation of the world economy, trade and financial flows are becoming more accessible

Initially the country’s bank currency had been viewed as inflexible since it was anchored on the depreciating worth of the

With the economy constantly changing, we are starting to see drastic changes in our dollar. A countries currency determines their strength in the market and their inflation rate. With a higher inflation rate, they are able to buy more and do more for a cheaper price. To help us better understand the difference between the weak dollar and the strong dollar, we will go in depth with both weak and strong dollars and its advantages and disadvantages, the currency monitor, the causes of the weak and strong dollar, and how it fluctuates and affects operations.

The United States should pursue and implement policies that are export oriented and keep the dollar relatively undervalued. Right now, there is much controversy over whether or not the U.S. should pursue a strong or weak dollar. It is important to note this controversy because exchange-rate policies are fueled by interest groups who are seeking to advance their economic statuses. An exchange rate is the price of one currency in comparison to another, and are determined by supply and demand. The determination of how much a dollar can appreciate or depreciate is political decision set forth by government. However, government is vulnerable and accountable to the competing pressures of interest groups. Ultimately, the opposing groups have different policies that will advance their economic gain, these policies are directly contradictory and are dependent on the value of the dollar.

In an open and deregulated economic environment, exchange rates can play an important role in macroeconomic management for stability and growth. The increasing role of exchange rates since the early 1970s has indeed been a break from the Bretton Woods tradition of the 1950s and 1960s that assigned a limited role for exchange rates in economic affairs. However, the banking and currency crises of the 1990s that afflicted many developing countries in different regions have provided a somber lesson that in a global economic setting, exchange rate policy, and monetary and financial policy more broadly, cannot be

The United States of America has enjoyed the strongest economy on the face of earth for quite a long time (Index Mundi, 2012). It has also enjoyed the portion of eminence on political platform. Having owned the valuable resources, the economy has gained high importance for both developing and developed nations. The currency of USD is assumed to be the common medium of transaction at international level and it is also a benchmark to calculate the value of other currencies.

Iceland is now having financial crisis because of its unhealthy banking system and monetary policies. Its currency becomes an unwanted dollar due to its fluctuating exchange rate. To regain the confident and rebuild its financial system, a sound currency is crucial. Canada, one of the strongest economies in OECD, has a healthy banking system and conservative monetary policies. Its currency is greatly approved and accepted by world financial institutions and investors. Even though Canadian Dollar has some weaknesses compared to large economies like U.S or E.U, its advantages are stronger and

Dollarization is the process in which nations “replace their domestic currencies [with foreign legal tender] …to obtain economic growth and stability” (Rivera-Solis 330). The US dollar is the most common choice of exchange in this practice, though the adoption of other first world states currencies may be entertained as well. Though its effects are not instant, US dollarization has brought many gradual benefits to the economic statuses of several countries. There are two types of dollarization: official and unofficial. In the process of official dollarization, a state gives complete monetary control to a foreign nation, ceding its right to both create a central bank and issue a domestic form of currency. Where as a nation loses its sovereignty to make decisions concerning its money supply in official dollarization, unofficial dollarization allows states to keep most of its control in place. Nations who implement dollarization unofficially keep their ability to own a central bank to fall back on, in cases of economic emergency, and regulate their own currency. Some studies encourage the promotion of official dollarization, while other scorn it’s outcome and option for its slighter counterpart, partial dollarization, instead. This paper explores the differences in both policies and the effects of dollarization on four separate nations: El Salvador, Panama, Zimbabwe, and the British Virgin

International transactions, balance of payments between countries and economic strength are harder to gauge on a daily basis, but they play a major role in longer-term trends in many markets. The currency markets are a gauge of how well one country 's currency and economy is doing relative to others. A high demand for a currency means that currency will rise relative to other currencies.

The discussion of a single currency for West African Countries has been going on for over a decade now. The countries of West Africa are working towards achieving monetary and currency integration by introducing a common currency called “Ecoi” throughout the West African Monetary Zone (WAMZ) (“Common currency for West Africa”, 2017). Therefore, I will be discussing the disadvantages of the integration of currencies in West African Countries and explaining why the integration of currencies in West Africa is a bad thing.

A fixed exchange rate regime will offer an economy greater stability in international prices and therefore encourage trade. Additionally, for developing countries a fixed rate will assist in promoting institutional discipline as the country will adopt restrictive monetary and fiscal policies that foster an anti-inflationary environment. A significant weakness of a fixed rate is that it is subject to destabilizing speculative attacks which could lead to financial meltdowns and devastating economic contractions. A floating exchange rate regime allows central banks to combat macroeconomic factors such as unemployment, inflation, and interest rates without having to worry about the effect on exchange rates. However, developing countries whose economies depend on trade will be reluctant to allow their exchange rates to fluctuate freely.