BUSI2025 Chapter Notes - Chapter 11-12: Special Drawing Rights, Floating Exchange Rate, International Development Association
Document Summary
System of exchange rates and international payments that facilitates trade and investment. Currency exchange rates depend on the structure of the ims: rules governing currency exchange, floating system: supply/ demand in the foreign exchange market determines value, pegged system: value fixed to a reference country, dirty float. Minority of countries have a floating currency. Other exchange rate regimes: pegs to major currencies or to basket of currencies, managed floating within a range of another currency, no separate legal tender, adjustable peg, currency board. The case for floating exchange rates: monetary policy autonomy, help with trade balance adjustment. The case for fixed exchange rates: monetary discipline, speculation limited, uncertainty. The imf today: the quota system, assistance programs, special drawing rights. Mission: global poverty reduction and improvement of living standards. International development association: low-interest loans, interest-free credit, grants for education. Loans to 68 countries in economic and currency crisis. All imf loans packages require tight macroeconomic and monetary policy.
