How Can A Country Be Regarded As Developed Or Underdeveloped

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

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

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

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.

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

Examine the connection and the differences between the official exchange rate market controlled by the CADIVI and the permuta. Discuss the states of equilibrium in each of these markets. Central banks intervene in foreign exchange markets in order to achieve a variety of overall economic objectives, such as controlling inflation, maintaining competitiveness or maintaining financial stability. The precise objectives of policy and how they are reflected in foreign exchange market intervention depend on a number of factors, including the stage of a country‟s development, the degree of financial market development and integration, and a country‟s overall vulnerability to shocks. The precise definition of which operations in forex markets

8. How can a central bank peg the value of its currency relative to another currency?

In 1971 under the guidence of president Nixon, America broke ties with the Betton Woods agreement making the U.S. dollar a “fully floating fiat currency” allowing the printing of dollars (paper money) not backed by the gold standard to pay for the $500 billion Vietnam war and rising welfare programs (Mills, 2014). Then in 1973 Nixon made a agreement to protect the nation of Saudi Arabia if they would accept the U.S. dollar as the only form of payment for their oil termed the”petrodollar” (Mills, 2014). This along with all other international trade turned the dollar into the “all mighty dollar” world wide. As a result all nations had to buy U.S. dollars at an exchange rate for their currency to buy and sell goods and services internationally valuating the dollar higher then it has ever been valued before.

The scope of this paper is to approach as best as possible the various reasons for this disparity and try to predict the future of the two currencies based on accurate and up-to-date information. At this point, the authors would like to make clear that they do not

Kiguel and O 'Connell (1995), have written one of the most comprehensive studies to date on the topic of dual exchange rate systems in developing countries. They posit that, although dual exchange rates are not strange arrangements in emerging countries, given their limited effectiveness, they are “often liberalized at some point in favor of a unified foreign exchange market” (op. cit.).

Later in the same year, the G20 also agreed that “developing countries should have even greater freedom to use capital controls than the IMF guidelines allow.” Foreseeably, as long as a floated exchange rate is commonly adopted in the international society, while emerging markets uses capital control to respond to volatile capital inflow, the discussion on currency wars and capital controls would continue in the

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.