POLSCI 160 Lecture Notes - Lecture 24: 1997 Asian Financial Crisis, Fixed Exchange-Rate System, Cryptocurrency
Document Summary
Bretton woods: dollar as reserve, fixed rates w devaluation. Economic and monetary union (emu) in eu, euro. Post 1971: floating rates w management, bands, pegs, and free floats. In 6 months, a bunch of currency dropped dramatically. Medium of exchange, unit of account, and store of value. Commodity money: precious metals and odd stuff. Rests on faith and confidence of people in its value. Matter as it affects import and export prices. Devaluation revives economy when it is failing so it brings down prices for domestic producers. Under fixed rates, central banks must exchange currencies at those rates. Under floating rates, market forces determine rates. In zimbabwe, people exchanged their money for foreign currency. If failing, like in argentina, you want to maintain value of currency. Created new currency 1-1 w us dollars. Collapse in 2000 because they could not devalue. Reduce exchange rate risk to encourage trade. Economy needs to adjust to external pressures.
