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Chp2. Exchange Rate PDF
Chp2. Exchange Rate PDF
Exchange rate
Gold Standard
Purchasing Power Parity
Bretton Woods
The World Bank
The International Monetary Fund
The Smithsonian Agreement
Floating Rate System
The European Monetary Unit and The European Monetary
System
Asian Clearing UNION (ACU)
The Group of Seven Monetary System
Liberalised Exchange Rate Monetary System
The Euro
The exchange rate is the rate at which one currency is
converted (bought or sold) in exchange to another
currency
The growth of international trade relationship has
resulted in the need for conversion of one currency
for another.
The buyer can pay normally only in the currency of
his country while the seller would like to receive
payment in the currency of his country.
Initially all currencies were based on the gold
standard.
With the introduction of paper currency there was an
implied understanding that the currency note if
submitted to the Central Bank could be converted
into gold.
Exchange rates between currencies were frozen based
on the gold exchange standard.
Given confidence in the ability and willingness of
governments to exchange paper for gold at a fixed
rate, individuals were content to hold and use gold
certificates.
Gold was the means of international settlement for
receipts & payments.