Beruflich Dokumente
Kultur Dokumente
Business 7e
by Charles W.L. Hill
McGraw-Hill/Irwin
Chapter 10
Introduction
The institutional arrangements that countries adopt to
govern exchange rates are known as the international
monetary system
When a country allows the foreign exchange market to
determine the relative value of a currency, a floating
exchange rate system exists
When a country fixes the value of its currency relative to
a reference currency, a pegged exchange rate system
exists
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Introduction
When a country tried to hold the value of its currency
within some range of a reference currency, dirty float exists
Countries that adopt a fixed exchange rate system fix
their currencies against each other
Prior to the introduction of the euro, some European
Union countries operated with fixed exchange rates within
the context of the European Monetary System (EMS)
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Who Is Right?
There is no real agreement as to which system is better
We know that a fixed exchange rate regime modeled
along the lines of the Bretton Woods system will not work
A different kind of fixed exchange rate system might be
more enduring and might foster the kind of stability that
would facilitate more rapid growth in international trade and
investment
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Currency Boards
Countries using a currency board commit to converting
their domestic currency on demand into another currency
at a fixed exchange rate
To make this commitment credible, the currency board
holds reserves of foreign currency equal at the fixed
exchange rate to at least 100% of the domestic currency
issued
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Currency Management
Managers must recognize that the current international
monetary system is a managed float system in which
government intervention can help drive the foreign
exchange market
Under the present system, speculative buying and selling
of currencies can create volatile movements in exchange
rates
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Business Strategy
Managers need to recognize that while exchange rate
movements are difficult to predict, their movement can
have a major impact on the competitive position of
businesses
To contend with this situation, managers need strategic
flexibility
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Corporate-Government Relations
Managers need to recognize that businesses can
influence government policy towards the international
monetary system
So, companies should promote an international monetary
system that facilitates international growth and
development
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