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International Economics: Exchange-Rate Systems
International Economics: Exchange-Rate Systems
By Robert J. Carbaugh
9th Edition
Chapter 16:
Exchange-Rate Systems
Number
of Countries
39
8
31
33
47
Carbaugh, Chap. 16
Carbaugh, Chap. 16
Key currency
All
countries
Industrial
countries
Developing
countries
US dollar
Japanese yen
Pound sterling
Swiss franc
Euro
Other
68.2%
5.3
3.9
0.7
12.7
9.2
73.3%
6.5
2.0
0.2
10.2
7.8
64.3%
4.4
5.2
1.1
14.6
10.4
Carbaugh, Chap. 16
Carbaugh, Chap. 16
Carbaugh, Chap. 16
Carbaugh, Chap. 16
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10
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11
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12
13
14
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15
16
17
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18
19
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20
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21
Carbaugh, Chap. 16
22
Crawling peg
Establishing a fixed exchange rate is difficult
in an economy with high inflation
A number of nations use a crawling peg,
under which the fixed rate is frequently
adjusted to account for inflation or other
factors
Frequent changes keep pegged rates from
becoming unrealistic, and unannounced
changes keep speculators at bay
Carbaugh, Chap. 16
23
Exchange controls
Some nations (most, until the 1950s) use controls
over foreign exchange to control the balance of
payments
At the extreme, the government can have a
monopoly over buying and selling foreign
exchange, capturing export income and limiting
import expenditures
Multiple exchange rates are also used, with
different rates set for more or less desired
transactions (discouraging imports, for example)
Carbaugh, Chap. 16
24