1.

Bình luận và cho ý kiến về chính sách tỷ giá hối đoái và phân tích chính sách tỷ
giá với hoạt động nhập khẩu hoặc xuất khẩu → Give opinions on exchange rate
policy (tr 187) and analyze exchange rate policy for import or export activities

Opinions on exchange rate policy

The exchange rate policy refers to the manner in which a country manages its currency in
respect to foreign currencies and the foreign exchange market. The exchange rate is the rate
at which the domestic currency can be converted into a foreign currency. In turn, this affects
the costs of domestic production and finance relative to foreign products and capital. In
formulating exchange rate policy, a balance must be found between several differing, and
sometimes conflicting, objectives. In particular, the use of the exchange rate to promote the
competitiveness of domestically-produced goods must be considered alongside the
implication for the international purchasing power of the currency and, in particular, the
impact of changes in the exchange rate on domestic inflation.

Exchange rate policies refer to the strategies and actions implemented by governments and
central banks to manage and regulate the value of their currency in relation to other
currencies in the foreign exchange market. These policies play a critical role in influencing a
country's trade competitiveness, inflation rates, economic stability, and overall economic
performance.
There are various types of exchange rate policies adopted by different countries:
● Fixed Exchange Rate: Under this policy, a country pegs its currency's value to another
currency or a basket of currencies. Governments or central banks intervene in the
foreign exchange market to maintain a stable exchange rate. This system provides
certainty for international trade and investment but requires continuous monitoring
and intervention to prevent currency fluctuations.
● Floating Exchange Rate: In a floating exchange rate system, the value of a currency is
determined by market forces of supply and demand without government intervention.
Fluctuations in the currency's value are common and can be influenced by various
factors such as economic conditions, interest rates, inflation rates, and market
speculation. This system offers flexibility but may lead to volatility and uncertainty in
currency values.
● Managed Float: This is a hybrid approach where the exchange rate is primarily
determined by market forces, but the central bank occasionally intervenes to stabilize
the currency or prevent excessive volatility. It allows for some flexibility while still
providing a level of control over extreme fluctuations.
● Pegged Exchange Rate: Similar to a fixed exchange rate, this policy involves tying the
value of a country's currency to a single currency or a basket of currencies. However,
unlike a fixed rate, the pegged rate may be periodically adjusted to reflect changes in
economic conditions.
Exchange rate policies have significant implications for the domestic economy. A strong
currency can make imports cheaper but exports more expensive, potentially affecting a
country's trade balance. On the other hand, a weaker currency can boost exports but may lead
to higher inflation due to increased import costs. The choice of exchange rate policy depends
on various factors, including economic goals, trade objectives, inflation targets, and overall
economic stability.

Central banks and governments regularly review and adjust their exchange rate policies in
response to changing economic conditions and global market dynamics. The effectiveness of
these policies relies on a balance between maintaining stability and allowing flexibility to
support economic growth and competitiveness in the international market.

Analyzing exchange rate policy for import or export activities

Exchange rate policies significantly impact import and export activities by influencing the
competitiveness of a country's goods and services in the international market. Changes in
exchange rates can have profound effects on the costs of imports and exports, thereby
affecting trade balances and economic growth.

Impact on Imports: When a country's currency depreciates relative to other currencies,

imports become more expensive. A weaker domestic currency means that the purchasing
power of that currency decreases compared to others, resulting in increased costs for
imported goods and services. This scenario can lead to higher prices for imported products,
potentially causing inflationary pressures within the economy. Importers may face challenges
as they need to pay more in their domestic currency to purchase the same quantity of foreign
goods.

Impact on Exports: Conversely, a depreciation of the domestic currency can benefit

exporters. A weaker currency makes the country's goods and services cheaper for foreign
buyers, boosting export competitiveness. This can lead to increased demand for domestically
produced goods in international markets, potentially improving a country's trade balance.
Export-oriented industries may thrive as their products become more attractively priced
abroad, contributing positively to economic growth and employment.

However, these effects are not solely determined by exchange rates; other factors such as the
quality of goods, global demand, trade policies, and production costs also play crucial roles in
determining a country's export performance.

Furthermore, a stronger domestic currency, resulting from an exchange rate appreciation, can
have the opposite effects on import and export activities. A stronger currency makes imports
cheaper for domestic consumers but can make exports more expensive for foreign buyers.
This situation may negatively impact a country's export competitiveness and trade balance,
potentially leading to decreased export revenues and affecting industries reliant on
international markets.

Governments often use exchange rate policies as a tool to influence trade balances. For
instance, a country facing a trade deficit may intentionally devalue its currency to promote
exports and reduce imports. Conversely, a country with a trade surplus may aim for currency
appreciation to control inflation and increase purchasing power for imported goods.
In conclusion, exchange rate policies significantly impact import and export activities by
influencing the costs and competitiveness of goods and services in international markets. The
management of exchange rates requires a delicate balance to support both import-dependent
industries and export-oriented sectors while considering broader economic objectives such as
inflation control, economic growth, and trade balance sustainability.

2. (1) Hãy phân tích thị trường ngoại hối (market foreign exchange) và vai trò
của nó trong thời kỳ phát triển kinh tế → Analyzing the market foreign
exchange (tr 61) and its role in the development of economy?

Analyzing the market foreign exchange

The foreign exchange market is a market where trading activities involving the buying and
selling of different currencies, instruments of payment in foreign currencies take place, while
also being the place where exchange rates are determined based on the relationship between
supply and demand.

The foreign exchange market is where national currencies are exchanged with each other, and
exchange rates are established. Put simply, it is the market for exchanging domestic currency
for foreign currency and vice versa.

The foreign exchange market is essential because countries engaged in international trade,
investment, and borrowing all have their own national currencies, and they need to exchange
them for the currencies of their trading partners to complete transactions.

The foreign exchange market allows for the exchange of one currency for another. Large
commercial banks serve this market by holding inventories of each cur- rency so that they
can accommodate requests by individuals or MNCs for currency for various transactions.
Individuals rely on the foreign exchange market when they travel to foreign countries.

For example, people from the United States exchange dollars for Mexican pesos when they
visit Mexico, dollars for euros when they visit Italy, or dollars for Japanese yen when they
visit Japan.

Its role in the development of economy

The foreign exchange market serves as a means for investors to convert currencies during
international trade and investment activities. Additionally, it caters to their desire to profit
and accumulate wealth through investments in tangible assets or financial instruments. For
instance, a Japanese investor noticing higher interest rates in the New York market compared
to Tokyo might decide to withdraw funds from financial asset investments in Japan to invest
in the United States.
The foreign exchange market is a tool for central banks to implement monetary policies to
control the economy in line with government objectives. For example, if the government
aims to encourage exports and restrict imports to minimize trade deficits and balance of
payments deficits, it can request intervention by the central bank through the foreign
exchange market by buying foreign currency. Conversely, if the foreign currency appreciates
excessively against the domestic currency to the extent of creating significant inflationary
pressures, the government may request the central bank's intervention by selling foreign
currency to increase the value of the domestic currency. The foreign exchange market can be
seen as a gateway, and exchange rates as a tool through which central banks can intervene to
execute their monetary policies.

Moreover, the foreign exchange market also provides tools for hedging and insuring against
exchange rate risks.

2. (2) Hãy phân tích chính sách tỷ giá và vai trò của nó trong thời kỳ phát triển kinh
tế → Analyzing the exchange rate policy and its role in the development of
economy?

Analyzing the exchange rate policy

Định nghĩa:
Exchange rate policy comprises government and central bank activities aimed at maintaining
or influencing the exchange rate of the Vietnamese Dong against other currencies, aligning
with national economic objectives.

Exchange rate policies affect inflation, growth, imports and exports, balance of payments,
and foreign exchange reserves. Vietnam's current exchange rate policy is a managed floating
exchange rate, allowing the exchange rate to fluctuate within a certain range according to
market supply and demand and intervening when necessary.

Mục tiêu:
Different countries may have varied objectives for their exchange rate policies based on their
specific circumstances and needs. Some common objectives of exchange rate policies
include:

Inflation control: Exchange rate policies can help stabilize domestic prices by limiting
exchange rate fluctuations, avoiding situations where high exchange rates lead to expensive
imports or excessively low rates result in cheap exports, impacting business competitiveness
and people's incomes.

Promotion of growth: Exchange rate policies can stimulate production and consumption by
creating advantages for imports and exports, attracting foreign investment, increasing money
supply with low interest rates, encouraging investment, and spending.
Improvement of balance of payments: Exchange rate policies can assist in balancing foreign
exchange income and expenditure by adjusting exchange rates to align with the economic
competitiveness of the country, promoting exports and restricting imports, increasing foreign
exchange earnings, and reducing foreign exchange spending.

Increase in foreign exchange reserves: Exchange rate policies can help bolster foreign
exchange reserves by intervening in the foreign exchange market, buying and selling foreign
currency to maintain a desired exchange rate level, creating a resource to deal with adverse
market fluctuations.

Its role in the development of economy

Exchange rate policy plays a deliberate role as an intervention by monetary authorities

alongside the supply and demand dynamics in the foreign exchange market, causing
fluctuations in the exchange rate. Exchange rate fluctuations affect prices, economic growth,
and trade balance.

Exchange rates can impact prices through two main channels: the indirect channel (affecting
aggregate demand) and the direct channel (affecting aggregate supply). Through the direct
channel, the transmission process of exchange rate movements to domestic prices can be
divided into two stages. Initially, exchange rate fluctuations are transmitted to the prices of
imported goods. In the second stage, changes in the prices of imported goods affect
production costs (if imported goods are inputs for domestic production), ultimately passing
on to consumer prices.

The influence of exchange rates on investment activities is also reflected in the level of risk.
If the level of risk decreases, investment activities increase, consequently generating more
employment opportunities. Therefore, significant fluctuations in exchange rates coupled with
increased risk act as factors that reduce the inflow of international investment capital into a
country, impacting the pace of growth.

3. Phân tích tác động chính sách tỷ giá việt nam đến nền kinh tế việt nam trong
thời kì 3 năm gần nhất → Analyze the impact

Over the last three years leading up to 2023, Vietnam has implemented exchange rate policies
aimed at maintaining a relatively stable currency while simultaneously supporting its export-
oriented economy. The Vietnamese dong (VND) was managed within a managed floating
regime, where the State Bank of Vietnam (SBV) intervened in the foreign exchange market
to control fluctuations and maintain a certain level of stability.

One significant impact of these policies was the maintenance of export competitiveness. By
managing the exchange rate, Vietnam aimed to prevent excessive appreciation of the dong
against major trading currencies, such as the US dollar, to support its export-driven
industries. A stable exchange rate helps Vietnamese exporters remain competitive in global
markets by keeping their products relatively affordable compared to competitors.

However, these policies also posed challenges. Despite efforts to maintain stability,
fluctuations in global currency markets, especially amid uncertainties such as trade tensions
and economic shocks (such as the COVID-19 pandemic), affected Vietnam's ability to
control its exchange rate entirely. There were periods when the dong experienced slight
fluctuations, requiring intervention from the SBV to stabilize it.

Furthermore, managing the exchange rate to support exports could potentially lead to
inflationary pressures. A weaker currency might increase the cost of imported goods,
impacting domestic consumers. However, the SBV also had to balance this concern with the
need to maintain a competitive export environment.

In recent years, Vietnam has also been gradually liberalizing its financial markets and making
efforts to meet the criteria for being labeled a "market economy." Such changes have
included steps toward greater exchange rate flexibility and increased foreign exchange
reserves to enhance the country's ability to withstand external economic shocks.

In conclusion, Vietnam's exchange rate policies in the last few years aimed to strike a balance
between supporting export competitiveness and managing inflationary pressures. While these
policies contributed to maintaining stability in the currency market, challenges persisted,
particularly amid global economic uncertainties. The effectiveness of these measures and
their impact on the Vietnamese economy required ongoing monitoring and adjustment to
navigate the dynamic global economic landscape.

4. Discuss your opinion about international monetary system và vai trò của nó đối
với thương mại và tài chính quốc tế (hệ thống tiền tệ quốc tế?) → Discuss your
opinion about the international monetary system and its role in international
trade and finance
The formation and development of monetary regimes: Basis and rules for determining
and regulating exchange rates in historical periods
• Methods and instruments regulating the determination and maintenance of the value
of each country's currency
• The formation and development of international financial institutions
• The impact of the international financial system on the stability and development of
countries
The International Monetary System is a set of rules that governs international
payments (exchange of money).

● IMS before the first World War(1914)

Commodity money (before 1870) - Commodity money (bartering system) – bản vị
hàng hóa - “Undervalue” metal coin (1540-1560) – Tiền đúc thiếu giá - Thomas
Gresham (UK) '' bad money drives out good‘’ (tiền xấu đuổi tiền tốt ra khỏi lưu
 thông) - Bimetallic standards (1792-1861): gold and silver (song bản vị: vàng và bạc)
- Broken bimetallic standard (1861) – chế độ song bản vị sụp đổ - Convert USD note
to gold (1879) Gold standard Act signed in the US (1900) : Quyết định chuyển đổi
USD ra vàng (1879) và Đạo luật bản vị vàng ở Mỹ (1900)
Gold standard (1880-1914) - The golden age of the gold standard (1880-1914): the
international monetary system operated stably and cooperatively among countries in
the region and the world - Principles 1. Secure the value of money with gold. 2.
Freely minting gold coins of full value 3. Freely export and import golds 4. Having a
large enough gold reserve is required to ensure the purchasing power of the currency
– money backs to gold. - Advantage and disadvantage
1. Advantage: limit power of Government and reducing inflation
2. Disadvantage: countries with limited gold resources

● IMS during the two World War (1914 - 1944)

The end of the gold standard and the floating exchange rate system: war financing
and explosive inflation, disrupting the ability to maintain moneygold relations
▪ The redefinition of the 1920 gold standard: the revival of the gold standard and its
characterization of the 1925-1931 gold standard.
▪ The collapse of the international trading and financial system after the Great
Depression 1929-1933: The disintegration of the monetary blocs (GBP, USD, and
others continued to be tied to gold), ending the regime gold standard.
▪ Negotiations on the reconstruction of the international monetary system
▪ 1941 Bretton Woods Conference 1944 and the form of the Bretton Woods System

● IMS after World War II (1944 – 1990s)

Bretton Woods system
Forming of Bretton Woods system in 1944 - Characteristics and operations of the
Bretton Woods 1944 monetary system: the USD standard - The positive effects of the
Bretton Woods regime - The fall of Bretton Woods • Pressures and efforts • The
collapse of the Bretton Woods system was officially announced on August 15, 1971
Two amendments to the terms of International Monetary Fund (IMF): + The forming
of SDR (Special Drawing Right – Quyền rút vốn đặc biệt) + Countries are not
allowed to attach the value of their currency to gold and choose the exchange rate
regime by themselves •European Monetary system (EMS) •European Monetary Union
•International Bank for Reconstruction and Development – IBRD)
USA current a/c Surplus, European CA deficits - European countries short of USD for
reconstructions - 1948: Marshall grant made by USA to Europe - 1949 : European
countries inflates - 1950s: Balance of payment of US deficits - 1958: European
currencies freely converted - 1971: Bretton Woods collapsed

European Monetary Union

+ Forms of economic association: Free trade area; Customs Union; Common market;
Economic Union; Currency Union
+ Forming the European economic and monetary union
 The European Economic and Monetary Union was officially established on January 1,
1999. Conditions for joining the European Economic and Monetary Union: + Low
inflation, not exceeding 1.5% compared to the average of the three countries with the
lowest inflation. + Budget deficit does not exceed 3% of GDP. + Public debt is less
than 60% of GDP and exchange rate fluctuation between currencies is stable for two
years under the conversion mechanism (ERM). + The interest rate (based on the
interest rate on bonds with a term of 10 years or more) is not more than 2% compared
to the average rate of the 3 countries with the lowest interest rates. - On January 1,
2002, the EUR was officially operated in 12 member countries including: France,
Germany, Austria, Belgium, Finland, Ireland, Italia, Luxembourg, Netherland, Spain,
Portugal

Vai trò trong thương mại và tài chính quốc tế:

The international monetary system plays a crucial role in facilitating international trade and
finance. Its functions are closely intertwined with the smooth operation of global economic
activities. One of its key functions is maintaining exchange rate stability. By coordinating
monetary and financial relations among member countries, the system ensures that exchange
rates remain stable, providing businesses with the certainty they need to engage in cross-
border trade.

Additionally, the system enables currency convertibility, allowing for seamless transactions
between different countries. This convertibility ensures that businesses can easily exchange
one currency for another, facilitating international trade and investment. Moreover, the
international monetary system provides various payment mechanisms that simplify the
settlement of international transactions. Systems such as wire transfers, letters of credit, and
electronic payment systems enable the efficient transfer of funds between buyers and sellers
across borders.

The existence of a reserve currency within the international monetary system further supports
international trade and finance. A reserve currency, such as the U.S. dollar, serves as a widely
accepted medium of exchange and store of value. It simplifies transactions and enhances
liquidity in the global economy.

International monetary cooperation is another vital function of the system. Through

institutions like the International Monetary Fund (IMF), countries can coordinate policies,
exchange information, and provide financial assistance during times of crises. This
cooperation helps maintain financial stability and addresses common challenges faced by
member countries.

Furthermore, the international monetary system assists countries in adjusting imbalances in

their balance of payments. It provides mechanisms for managing deficits or surpluses, such as
through exchange rate adjustments, monetary policy changes, or external financing. These
adjustments contribute to maintaining stability in international trade and finance.
In summary, the international monetary system plays an essential role in facilitating
international trade and finance. Through functions such as exchange rate stability, currency
convertibility, payment mechanisms, reserve currencies, international cooperation, and
balance of payments adjustment, the system supports the smooth operation of global
economic activities. It ensures predictability, enables efficient transactions, and promotes
financial stability, fostering an environment conducive to international economic growth and
development.

Example about IMS: Bitcoin is a digital currency or cryptocurrency that operates on a

decentralized network called the blockchain. It was introduced in 2009 by an anonymous
person or group of people using the pseudonym Satoshi Nakamoto. Bitcoin is the first and
most well-known cryptocurrency, and it has had a significant impact on the development of
the cryptocurrency industry

5. Phân tích các yếu tố ảnh hưởng tới giá trị / tỷ giá của đồng đô la mỹ so với VNĐ
trong tương lai. Give examples → Describe the factors that affect the future
movement in the value of USD against the Vietnamese Dong. Give supportive
examples.

The future movement in the value of the USD against the Vietnamese Dong is influenced by
a myriad of factors that encompass economic indicators, monetary policy decisions, market
sentiment, and geopolitical events. These factors collectively shape the exchange rate
dynamics between the two currencies.

Macroeconomic factors hold significant weight in determining exchange rate movements.

Indicators such as GDP growth, inflation rates, trade balances, and interest rates play a
crucial role. For instance, if Vietnam experiences higher inflation compared to the United
States, it may lead to a depreciation of the Vietnamese Dong against the USD. Similarly,
disparities in interest rates between the Federal Reserve (Fed) in the U.S. and the State Bank
of Vietnam (SBV) can influence the attractiveness of each currency for investors. If the Fed
raises interest rates while the SBV keeps rates unchanged, it may result in an appreciation of
the USD against the Vietnamese Dong.

Market sentiment and risk appetite are also vital factors affecting exchange rates. Investor
sentiment and perceptions of risk can lead to fluctuations. During times of global uncertainty
or financial market volatility, investors may seek safe-haven assets such as the USD, leading
to an increase in its value against the Vietnamese Dong. Conversely, when market sentiment
improves and risk appetite rises, investors may shift towards higher-yielding currencies,
potentially weakening the USD.

Trade and capital flows between countries are essential determinants of exchange rates as
well. The balance of trade and capital inflows/outflows can impact the value of a currency.
For instance, if Vietnam has a trade surplus with the U.S., it may result in an increased
demand for the Vietnamese Dong, strengthening its value against the USD. Similarly,
significant capital inflows into Vietnam can contribute to a stronger Dong.

Geopolitical events and factors also exert influence on exchange rates. Political instability,
trade disputes, changes in government policies, or geopolitical tensions can create volatility.
For example, if there are tensions between the U.S. and Vietnam or changes in trade
agreements, it can influence the exchange rate between the USD and the Vietnamese Dong.

It is essential to recognize that exchange rates are subject to multiple factors, and their
movements result from the interplay of these elements. The complex nature of exchange rate
determination necessitates close monitoring of these factors by traders, investors, and central
banks. Assessing and analyzing these influences allows stakeholders to adapt their strategies
accordingly and navigate the potential fluctuations in the value of the USD against the
Vietnamese Dong.

6. Should a state bank cố định tỷ giá? what is the advantages of tỷ giá cố định và
disad? give supportive examples → Should a state bank of VN fix its currency?
What would be the advantage of fixed currency, what would be the
disadvantages. Give supportive examples.

The decision to fix the exchange rate is an important policy decision that the central bank
must make based on the economic situation and policy objectives of the country.
The advantages of fixed currency is: A fixed exchange rate is an exchange rate where the
currency of one country is linked to the currency of another country or a commonly traded
commodity so they can trade freely and smoothly with each other. Some advantages we can
mentioned below:
Price Stability: A fixed exchange rate system provides a high degree of price stability since
fluctuations in the exchange rate are minimized. This stability can help control inflation and
provide a predictable environment for businesses and consumers. Our country benefits from a
stable exchange system by having a stable economic development, avoiding waves of risks
that cause currency devaluation.

Trade Confidence: Businesses can plan for transactions without worrying about sudden
currency value changes, making cross-border trade more predictable and manageable. We
can trade and exchange the country's unique products to potential markets without the risks of
price differences or additional taxes

Reduced Exchange Rate Risk: Fixed exchange rates eliminate the currency risk associated
with fluctuating exchange rates. This stability can be particularly beneficial for companies
engaged in long-term contracts, investments, and trade.
Foreign Investment: A stable exchange rate can attract foreign investment. Investors may be
more inclined to invest in a country with predictable currency values, reducing the risk
associated with currency fluctuations.
Setting a fixed exchange rate with your trading partner will provide currency rate certainty to
importers and exporters. When a small country fixes its currency to a superpower like the
United States and the European Union, they protect themselves from paying more when
importing products from developed countries. This appreciation happens when the U.S.
economy grows, which strengthens the dollar, thereby making it expensive for the smaller
countries to import. Hence, a fixed exchange rate hedges them from such a risk.

For small countries facing a BOP (Balance of Payment) crisis, any sudden change in the
exchange rate can discourage a lot of business and market activities. It helps avoid the drastic
depreciation of the currency It encourages foreigners to make more investments in a country,
taking advantage of a stable exchange rate. A fixed exchange rate helps to ensure the smooth
flow of money from one country to another. It helps smaller and less developed countries to
attract foreign investment. It also helps the smaller countries to avoid devaluation of their
currency and keep inflation stable.

Besides its various advantages, there are a few drawbacks to the fixed exchange rate
system. Some of them are as follows:

Vulnerability to speculator attacks: If the fixed exchange rate is not in line with reality or the
government is not capable of defending the exchange rate, speculators can attack the
exchange rate, pushing it away from its actual value and creating unwanted fluctuations in the
market.

Bypass International Competitive Environment: Another disadvantage of the fixed exchange

rate system is that it does not reflect any continuous change in the international competitive
environment.

Adequacy of Foreign Exchange Reserves: To have an effective and stable exchange rate, it is
essential to have the adequacy of holding foreign exchange reserves which is a difficult task
for poor developing countries. Therefore, it is not an adequate exchange rate system for small
developing countries.

Sacrifice of Internal Objectives of Growth: In order to maintain and control the fixed
exchange rate, a country has to sometimes sacrifice its internal problems and growth
objectives.

Hindrance in the Macroeconomic Objectives: It gives rise to currency value fluctuations,

making it difficult for the borrower to take money from the international market. It also has a
risk factor for the importing countries that their currencies may become weak against the
nations. In the Fixed exchange rate system, the state determines the single currency value for
all nations, which means that market forces do not have a role in determining value.
Inflexible System: For example, if a nation's currency is weak, it has to devalue its currency
to increase its products. It may cause higher inflation and will slow down economic growth.
It will widen the trade deficits, which would mean the import is higher than the export,
creating many economic hurdles for the coming generations.

Higher Rate of Interest: It demands a higher rate of interest to keep the value of the currency
stable. A higher interest rate impacts borrowing and makes the corporate world borrow
money. Foreign goods become more expensive and reduce the purchasing power of the
people.

7. How can central bank use indirect intervention ảnh hưởng tới tỷ giá. Ngân hàng
trung ương nên tác động trực tiếp hay gián tiếp và tại sao? Cho ví dụ → How
can the central bank use indirect intervention to change the value of currency?
(Tr208) Should the central bank intervene directly or indirectly, why? Give
supportive examples.

Ngân hàng trung ương sử dụng indirect intervention như thế nào:

Central banks can use indirect intervention by influencing the economic factors that affect
equilibrium exchange rates. A common form of indirect intervention is to increase interest
rates in an effort to attract more international capital flows, which may cause the local
currency to appreciate. However, indirect intervention is not always effective.

Government controls interest rates: When central banks of countries increase or reduce
interest rates, this intervention may have an indirect effect on the values of their currencies. If
a country experiences a currency crisis, its central bank may raise interest rates to prevent a
major flow of funds out of the country. However, this type of indirect interven- tion is often
ineffective during an actual currency crisis. Many countries, including Argentina, Brazil,
Thailand, and Turkey, have recently used the strategy of raising interest rates to cure a
currency crisis. In each situation, the action did not solve the problem, as foreign investors
still fled the country, causing the local cur- rency to weaken substantially. Furthermore, the
higher local interest rates increase the financing costs of the country’s firms, which can
reduce the amount of corporate borrow- ing and spending in a country, and may cause the
economy to weaken further. In many cases, a currency crisis may not be avoided unless the
underlying problem (such as political instability) is resolved. Usually, however, the central
bank is not the cause of the political problems, and it may have very little control over them.

Government Use of Foreign Exchange Controls: Some governments attempt to use foreign
exchange controls (such as restrictions on the exchange of the currency) as a form of indirect
intervention to maintain the exchange rate of their currency. China has historically used
foreign exchange restrictions to control the yuan’s exchange rate, although it has partially
removed these restrictions in recent years.
Should the central bank directly or indirectly:

The choice between direct and indirect intervention depends on various factors such as the
urgency of the situation, the country's foreign exchange reserves, market conditions, and the
central bank's long-term objectives. In practice, central banks often use a combination of both
direct and indirect interventions to manage their currency's value.

However, direct interventions, while providing immediate impact, can deplete foreign
exchange reserves and might not always yield sustained results. An example of direct
intervention is the Swiss National Bank's actions in the past. The Swiss National Bank (SNB)
intervened directly in the foreign exchange market by selling Swiss francs and buying foreign
currencies to prevent excessive appreciation of the franc. They did this to maintain the
competitiveness of Swiss exports. However, direct interventions require significant foreign
exchange reserves and may not always produce sustained effects, especially if market forces
oppose the central bank's actions.

Indirect interventions, on the other hand, can be less resource-intensive but may take time to
influence the exchange rate and are subject to market reactions. For example, the Federal
Reserve in the United States uses indirect interventions by adjusting interest rates. When the
Fed raises interest rates, it can attract foreign investment seeking higher yields, thereby
increasing demand for the U.S. dollar and potentially strengthening its value. However,
indirect interventions may take time to manifest effects and might not yield immediate results
in volatile market conditions.

Ultimately, the central bank must carefully assess the situation and select the intervention
method that aligns with its goals and prevailing economic conditions while considering the
potential risks and effectiveness of each approach.

8. Should vietnamese government cho phép đồng tiền của mình tự do thả nổi không
(float freely). What would be advantages trong chính sách thả nổi tỷ giá và
những nhược điểm gì? Give supportive examples → Should the Vietnamese
government allow its currency to float freely? What would be the advantages of
let currency float freely? And what is the disadvantage? (tr 189) Give supportive
example

Chính phủ có nên hay không?

The decision for a government, like Vietnam, to allow its currency to float freely is a
complex one that involves weighing several economic factors, advantages, and potential
drawbacks. Vietnam had been using a managed floating exchange rate system, which allowed
some flexibility in the value of the Vietnamese dong (VND) against other currencies while
maintaining a degree of control through interventions by the State Bank of Vietnam (SBV).

In the case of Vietnam, a sudden shift to a completely floating exchange rate might pose risks
due to the country's export-oriented economy, which heavily relies on stability for its
competitiveness in global markets. A managed floating system has provided some stability,
allowing Vietnam to control the dong's value to support its exports while also managing
inflation and economic stability.

A gradual move toward more flexibility in the exchange rate might be more prudent for
Vietnam. This could involve a phased approach that gradually reduces central bank
intervention, allowing the currency to have more room for market-driven movements while
maintaining some degree of control to prevent excessive volatility.

In summary, while a freely floating exchange rate system offers certain benefits, the decision
for Vietnam to adopt it fully requires careful consideration of its specific economic context,
potential risks, and the readiness of the economy to handle increased volatility and
fluctuations in the currency's value. So it is not the time for Vietnamese government allow its
currency to float freely yet.

Lợi thế:
One advantage of a freely floating exchange rate system is that a country is more insulated
from the inflation experienced by other countries.

Another advantage of freely floating exchange rates is that a country is more insulated from
unemployment problems in other countries.

An additional advantage of a freely floating exchange rate system is that each government is
free to implement policies irrespective of their effect on the exchange rate.

For example, under a freely floating rate system, the decline in U.S. purchases of U.K. goods
will lead to reduced U.S. demand for British pounds. Such a demand shift could cause the
pound to depreciate against the dollar (under the fixed-rate system, the pound would not be
allowed to depreciate). This depreciation will make British goods less expensive for U.S.
consumers, offsetting the reduced demand for these goods that may follow a reduction in
U.S. income. As was true with inflation, a sudden change in unemployment will have less
effect on a foreign country under a floating-rate system than under a fixed-rate system
Bất lợi:
One of the primary drawbacks of a floating currency is increased volatility. Exchange rates
can fluctuate widely, creating uncertainty for businesses, investors, and consumers. This
volatility can hinder long-term planning and investment decisions.

In a free-floating system, currencies can be susceptible to speculative attacks. Speculators

might exploit vulnerabilities, leading to rapid and destabilizing movements in the exchange
rate, impacting economic stability.

Another disadvantage is a depreciating currency can lead to imported inflation by making

imported goods more expensive. This can potentially contribute to rising prices domestically,
impacting consumers' purchasing power.
Finally, while a weaker currency can enhance export competitiveness, it can also increase
costs for importing goods and raw materials, potentially impacting businesses reliant on
imports.

For example, If the United States experiences high inflation, then the dollar may weaken,
thereby insulating the United Kingdom from the inflation (as discussed previously). From the
U.S. perspective, however, a weaker U.S. dollar causes import prices to be higher. This may
increase the price of U.S. materials and supplies, which in turn would increase U.S. prices of
finished goods. In addition, higher foreign prices (from the U.S. perspective) can force U.S.
consumers to purchase domestic products rather than foreign alternatives. When they
recognize that their foreign competition has been reduced by the weak dollar, U.S. producers
can more easily raise their prices without losing customers to foreign competition.

9. How can a central use direct or indirect công cụ để thay đổi tỷ giá. Give
supportive examples → How can a central bank use direct or indirect
intervention? And give supportive examples. (tr201)

Direct intervention:

● Direct Intervention as a Policy Tool

Central banks attempt to weaken their home currency under some conditions and strengthen
it under others. In essence, the exchange rate becomes a tool, like tax laws and the money
supply, that the government can use to achieve its desired economic objectives.

Influence of a Weak Home Currency: The central bank implements a direct inter- vention to
weaken its home currency in an effort to stimulate foreign demand for the country’s products.
A weak dollar, for example, can substantially boost U.S. exports and U.S. jobs; in addition, it
may reduce U.S. imports. The top part of Exhibit 6.5 shows how the Federal Reserve can use
direct intervention to affect the value of the dollar and, therefore, stimulate the U.S. economy.
Although a weak currency can reduce unemployment at home, it can also lead to higher
inflation. A weak dollar makes U.S. imports more expensive, thereby creating a competitive
advantage for U.S. firms that sell their products in the United States. Some U.S. firms may
increase their prices when the competition from foreign firms is reduced, which results in
higher U.S. inflation.

Influence of a Strong Home Currency: The central bank may also implement a direct
intervention to strengthen its home currency, which can reduce the country’s infla- tion. A
strong home currency increases the purchasing power of local consumers and corporations
that buy goods from other countries. This situation intensifies foreign com- petition and
forces domestic producers to refrain from increasing their prices. Therefore, the country’s
overall inflation rate should be lower if its currency is stronger, other things being equal. The
top part of Exhibit 6.6 shows how the Federal Reserve can use direct intervention to affect
the dollar’s value and thus reduce U.S. inflation. Although a strong currency may cure high
inflation, it may also increase home unem- ployment because it encourages local consumers
to purchase foreign products instead of domestically produced products. A currency’s ideal
value depends on the perspective assumed by the country and the officials who must make
decisions about such direct inter- ventions. The strength or weakness of a currency is just one
of many factors that influence a country’s economic conditions.

● Speculating on Direct Intervention

Speculating on Intervention Intended to Strengthen a Currency: If speculators anticipate

that a central bank will attempt to strengthen a specific currency and also believe that the
intervention will have its desired effects, they may take a position in that currency. In this
way, they are able to purchase the currency at a lower price than the price at which they can
sell the currency after the central bank intervention has had its effect.

Speculating on Intervention Intended to Weaken a Currency: Alternatively, if they

anticipate that a central bank will attempt to weaken a specific currency and also believe that
the intervention will have its desired effects, speculators may take short positions in that
currency by borrowing that currency and exchanging it for other currencies. Later, they can
reverse their transaction after the intervention has occurred. The obvious risk associated with
these speculative strategies is that the investors’ expec- tations about a central bank
intervening or the effects of the direct intervention may be wrong.

Central Banks’ Efforts to Disguise Their Strategy: The Fed usually attempts to intervene
without being noticed. However, dealers at the major banks that trade with the Fed often
transmit the information to other market participants. Also, when the Fed deals directly with
numerous commercial banks, markets are well aware that the Fed is interven- ing. To hide its
strategy, the Fed may pretend to be interested in selling dollars when it is actually buying
dollars, or vice versa. It calls commercial banks and obtains both bid and ask quotes on
currencies; that way, the banks will not know whether the Fed is considering purchases or
sales of these currencies.

For example, The SNB has historically engaged in direct intervention in the foreign exchange
market by selling Swiss francs and buying foreign currencies. In 2011, amid concerns about
the overvaluation of the Swiss franc against the euro, the SNB set a minimum exchange rate
target against the euro to prevent further appreciation. To maintain this target, the SNB
aggressively intervened, selling Swiss francs and purchasing euros, expanding its foreign
currency reserves significantly. However, this policy was eventually abandoned in 2015
when the SNB deemed it unsustainable due to increased pressure in the foreign exchange
markets.

Indirect intervention:

Central banks can use indirect intervention by influencing the economic factors that affect
equilibrium exchange rates. A common form of indirect intervention is to increase interest
rates in an effort to attract more international capital flows, which may cause the local
currency to appreciate

Government controls interest rates: When central banks of countries increase or reduce
interest rates, this intervention may have an indirect effect on the values of their currencies. If
a country experiences a currency crisis, its central bank may raise interest rates to prevent a
major flow of funds out of the country. However, this type of indirect intervention is often
ineffective during an actual currency crisis. Many countries, including Argentina, Brazil,
Thailand, and Turkey, have recently used the strategy of raising interest rates to cure a
currency crisis. In each situation, the action did not solve the problem, as foreign investors
still fled the country, causing the local currency to weaken substantially. Furthermore, the
higher local interest rates increase the financing costs of the country’s firms, which can
reduce the amount of corporate borrow- ing and spending in a country, and may cause the
economy to weaken further. In many cases, a currency crisis may not be avoided unless the
underlying problem (such as political instability) is resolved. Usually, however, the central
bank is not the cause of the political problems, and it may have very little control over them.

Government Use of Foreign Exchange Controls: Some governments attempt to use foreign
exchange controls (such as restrictions on the exchange of the currency) as a form of indirect
intervention to maintain the exchange rate of their currency. China has historically used
foreign exchange restrictions to control the yuan’s exchange rate, although it has partially
removed these restrictions in recent years.

For example, The U.S. Federal Reserve uses indirect intervention through monetary policy
tools, particularly interest rate adjustments, to influence the value of the U.S. dollar. For
instance, when the Fed raises interest rates, it can attract foreign investment seeking higher
yields, thereby increasing demand for the U.S. dollar and potentially strengthening its value
relative to other currencies. Conversely, lowering interest rates can decrease the
attractiveness of holding dollars, potentially leading to depreciation.

TRẮC NGHIỆM:

Question 1: The direct intervention used to regulate the exchange rate is:
a. Regulating the supply and demand of imported and exported goods through
international trade policies;
b. Measures to manage buying, selling and intervening in foreign currency supply
and demand;
c. Change of interest rate through regulation of money supply - demand;
d. Not the above measures
→ Explanation: Direct intervention in the context of regulating the exchange rate
involves the direct buying or selling of a country's currency by the central bank in the
foreign exchange market. This action is aimed at influencing the supply and demand of
the domestic currency relative to other currencies. Central banks conduct such
interventions to stabilize or alter the value of their currency against other currencies,
impacting its exchange rate. The measures involve direct actions by the central bank to
manage the supply and demand of foreign currency, making option b the accurate
choice in this scenario.

Question 2: The spot rate is defined as:

a. Exchange rate is applied and recorded in economic contracts;
b. Exchange rate is applied in the spot transactions;
c. The exchange rate is applied in the derivative transactions with a period of less than 3
months
d. The exchange rate is determined by the interbank money market;
→ Explanation: The spot rate refers to the current exchange rate at which a currency pair
can be bought or sold for immediate delivery or settlement, usually within two business
days (the standard settlement period in the foreign exchange market). It represents the
prevailing market price for currencies in spot transactions, where currencies are traded
for immediate delivery and payment. Therefore, option b best describes the definition of
the spot rate, indicating its application in spot transactions for immediate exchange of
currencies at the current market rate.

Question 3: The adjustment of the central exchange rate between VND (VND) against the US
dollar (USD) of the State Bank of Vietnam since early 2020 due to the impact of Covid 19
epidemic may have impact on:
a) Increase the inflation rate in Vietnam in the last 6 months of 2020;
b) Increase net exports and improve Vietnam's current account deficit by 2020;
c) Reduce the deficit of international payment balance by 2020;
d) All of the above impacts;
e) None of the above impacts
→ Explanation: The adjustment of the central exchange rate between the Vietnamese
dong (VND) and the US dollar (USD) due to the COVID-19 epidemic may lead to:
Higher Inflation: A weaker VND could raise import costs, increasing consumer prices.
Improved Net Exports: A depreciated VND might boost exports, improving the trade balance.
Reduced Payment Balance Deficit: Better trade balance could reduce the overall deficit in
international payments.
Hence, the adjustment in the exchange rate could have multiple impacts: increased inflation,
enhanced exports, and reduced payment balance deficits in Vietnam.

Question 4: Assuming that Vietnam continues to peg the exchange rate to the US dollar
(USD), when the trade war between the US and China continues to develop complicatedly,
the exchange rate between VND (VND) and USD (USD) from the second half of 2020 will
have fluctuations:
a) Increasing the price of VND and decreasing the price of USD;
b) Increase the price of USD, decrease the price of VND;
c) Both currencies change, so the exchange rate fluctuates slightly;
d) There is no basis to determine;
→ Explanation: If Vietnam continues to peg the exchange rate of the Vietnamese dong
(VND) to the US dollar (USD) amid the escalating trade war between the US and China,
fluctuations in the exchange rate between VND and USD are likely. In this scenario, as
tensions and uncertainties increase due to the trade war, there could be a rise in demand
for the USD as a safe-haven currency. Consequently, the increased demand for USD
would lead to an appreciation of the USD, resulting in a decrease in the price of VND
relative to the USD. Therefore, option b, which indicates an increase in the price of USD
and a decrease in the price of VND, aligns with the likely outcome under these
circumstances.
Question 5: The following factors will affect the inflow of direct investment into a country:
a) The political issues of that countries
b) The political risk
c) War, Civil War
d) All of the above answers
→ Explanation: Various factors influence the inflow of direct investment into a country.
These include political issues, political risk, wars, civil conflicts, and other geopolitical
uncertainties. Investors often consider political stability, the risk of political changes, and
the presence of conflicts or wars when deciding to invest in a country. Political
instability, conflicts, or the risk of potential changes in government policies can deter
foreign direct investment (FDI) as they create uncertainty and increase the perceived
risks for investors. Therefore, all the factors listed in options a, b, and c can significantly
impact the inflow of direct investment into a country.

Question 6: To improve the balance of international payments balance which is in deficit, the
government will implement the following measures:
a) Lower Interest Rate To Encourage Consumers
b) Encouraged To Invest Abroad
c) Implement Policies To Reduce Import Duty Of Goods
d) Perform adjustment to increase the exchange rate.

→ Explanation: Increasing the exchange rate of the domestic currency can make exports
more expensive for other countries and imports cheaper for domestic consumers. This
adjustment can help decrease imports and increase exports, potentially improving the balance
of payments by reducing the current account deficit.

Dưới chế độ bản vị vàng, nếu như Anh xuất khẩu ròng nhiều hơn sang Pháp so với việc
ngược lại, thì điều này có ảnh hưởng gì?
a. Việc mất cân bằng được điều chỉnh tự động
b. Việc mất cân bằng sẽ không kéo dài mãi mãi
c. Việc Anh xuất khẩu ròng sang pháp sẽ kéo theo dòng tiền vàng đổ từ
pháp sang anh → đúng
d. all of the above
→ Under the gold standard, a country's trade surplus (net exports) with another country would
result in a flow of gold from the deficit country to the surplus country. In this scenario, if
Britain has a net export surplus to France, it means that Britain is selling more to France than
it is buying from France. To settle the trade imbalance, France would need to pay Britain in
gold to cover the deficit, as per the gold standard rules. Therefore, the net export surplus for
Britain would lead to a flow of gold from France to Britain to balance the trade.

Hoạt động kinh doanh ngoại hối (acbit) sẽ được định nghĩa một cách rõ ràng nhất như
a. Điều kiện hợp pháp của chính phủ?
 b. Mua bán cùng lúc đồng thời các đồng tiền khác nhau với mục đích tạo lợi nhuận
→ đúng
c. Mua bán tài sản cùng thời điểm với mục đích making gruantee profit?
d. None of them above
→ Foreign exchange trading activities, often abbreviated as FX trading or forex trading,
involve buying and selling different currencies in the foreign exchange market. Traders
engage in these transactions with the objective of making a profit by capitalizing on
fluctuations in exchange rates between currencies. The essence of foreign exchange
trading revolves around speculating on the price movements of currency pairs, aiming to
buy low and sell high (or sell high and buy low) to generate profits. Therefore, option b
accurately describes the nature of foreign exchange trading activities.

Chính sách tiền tệ (international _ system) đã trải qua nhiều cuộc cách mạng khác nhau theo
thứ tự alpha như sau:
song bản vị → bản vị vàng (classical gold standard) → inter war period→ bretton woods chế
độ bản vị đồng đô la mỹ → flexible exchange float currency