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论文作者:英语论文论文属性:作业 Assignment登出时间:2014-12-15编辑:yangcheng点击率:5556

论文字数:5655论文编号:org201411142158439732语种:英语论文 English地区:马来西亚价格:免费论文

关键词:政治经济学国际金融金融essay范例Economics Essay


Political Economy Of International Finance Economics Essay




A government that wants to achieve credibility, price and macroeconomic stability usually chooses to peg its exchange rate of its currency to another major, stable, and low inflationary currency. This is done mainly to restore confidence among the market participants. Some of the ways this can be achieved is through financial markets by using open market operation, intervention in the forward exchange market, as well as changes in bank reserve requirements. However, there are limits to each of these policies. If a government chooses to defend its currency from depreciating, one or both of the following may occur. The country may end up with deteriorated reserves on one hand, and the limit of borrowing may be reached on the other. Nevertheless, a government that tries to defend its currency from appreciating may experience high inflation and a rising cost to that phenomenon. Balance of payments are said to be in crisis whenever governments are no longer able to defend a fixed parity due to restrictions on its actions (Krugman 1979)


But, most importantly, what and when will be the best policy to address the worsening of the terms of trade. Whenever we talk about balance of payments deficits, the first thing that comes to our mind is devaluation. Why don’t governments use short-term adjustments? There are different forms of short-term adjustment policies at countries’ disposals, but we will be focusing on devaluation throughout this paper. So, why don’t governments simply devalue their currencies and improve their balance of payments position. According to the literature, this is not an easy task to deliver; moreover, it is economically not the best feasible solution.


Causes affecting this particular issue are of different outlook and vary in complexity. However, there are some key factors that influence in many instances the issue at stake, including but not limited to:


Among those factors, we can differentiate between some influencing the trade account of a country by having a bear on exports and imports, and others reducing the availability of international financing as investors may lose confidence leading to capital flight. Since the diagnoses and the responses to the crises get even more complicated due to connections among assorted sectors, imbalances exacerbate leading to wild economic disorder .


Realignment of exchange rates, or in the case of balance of payments crisis, devaluation of the curren论文英语论文网提供整理,提供论文代写英语论文代写代写论文代写英语论文代写留学生论文代写英文论文留学生论文代写相关核心关键词搜索。

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