国际金融市场管理Ch06-VersC教材教学课件.pptVIP

Part II Exchange Rate Behavior;;Chapter Objectives;Exchange Rate Systems;In a fixed exchange rate system, exchange rates are either held constant or allowed to fluctuate only within very narrow bands. The Bretton Woods era (1944-1971) fixed each currency’s value in terms of gold. The 1971 Smithsonian Agreement which followed merely adjusted the exchange rates and expanded the fluctuation boundaries. The system was still fixed.;Find out more about the Bretton Woods conference and the Smithsonian Agreement at: /origins/confer.html /money.asp;Pros: Work becomes easier for the MNCs. Cons: Governments may revalue their currencies. In fact, the dollar was devalued more than once after the U.S. experienced balance of trade deficits. Cons: Each country may become more vulnerable to the economic conditions in other countries.;In a freely floating exchange rate system, exchange rates are determined solely by market forces. Pros: Each country may become more insulated against the economic problems in other countries. Pros: Central bank interventions that may affect the economy unfavorably are no longer needed.;In a pegged exchange rate system, the home currency’s value is pegged to a foreign currency or to some unit of account, and moves in line with that currency or unit against other currencies. The European Economic Community’s snake arrangement (1972-1979) pegged the currencies of member countries within established limits of each other.;The European Monetary System which followed in 1979 held the exchange rates of member countries together within specified limits and also pegged them to a European Currency Unit (ECU) through the exchange rate mechanism (ERM). The ERM experienced severe problems in 1992, as economic conditions and goals varied among member countries.;In 1994, Mexico’s central bank pegged the peso to the U.S. dollar, but allowed a band within which the peso’s value could fluctuate against the dollar. By the end of the year, there was substantial downward