POSC 3250 Lecture Notes - Lecture 7: Reserve Currency, Canadian Dollar, Capital Control
29 Mar 2016
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Document Summary
Problems in the monetary systems have huge and immediate ramiicaions. Loaing system- supply and demand of currency. Ixed/pegged- state intervenion: largest economic acivity, when the canadian dollar decreases in value, there are a lot of canadian dollars in global markets, not many people waning to purchase canadian dollars, fixed/pegged system. Currencies are pegged in relaion to key (or benchmark) currencies to gold/precious metals/other currencies. 19th century- states guarantee value of currency against gold=converibility currencies didn"t shit in relaion to one another. Moved away from gold standard, ixed currency in relaion to other currencies (paricularly usd) When moving away from gold standard, converibility was lost. Without converibility speculators may not accept oicial exchange rates. Limit the ability for people to exchange for other currencies. Buying canadian currency with foreign reserves (naional bank) Domesic policy adjustment- lower or raise interest rates: floaing system. Markets determine daily value of currency: modern real world systems. States peg rates but can adjust them if necessary.
