StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

International Monetary Economics - Essay Example

Cite this document
Summary
International Monetary Economics Table of Contents Introduction 3 The monetary approach 4 The elasticity approach 4 The traditional approach 4 Critical Analysis 5 Conclusion 9 Reference 11 Bibliography 12 Introduction Exchange rate is considered to be one of the most important prices in open economies affecting all businesses, policy decisions and investments…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.4% of users find it useful
International Monetary Economics
Read Text Preview

Extract of sample "International Monetary Economics"

Download file to see previous pages

One of the main fields of research which has attracted the attention of the researchers worldwide is the exchange rate and the trade balance relationship (Liew, Lim & Hussain, 2003, p.1). The elasticity model which is one of the most important models of balance of trade throws light on the prevalence of theoretical relationship between trade balance and rates of exchange of a nation (Stucka, 2004, p.22). There are a number of ways in which exchange rates can influence the trade balance of nations which provides valuable inputs to the nation’s policy makers to undertake exchange rate policies like devaluation policies etc in order to being about balance in the nation’s foreign trade.

Devaluation increases the prices of foreign currencies making imports more expensive in the home nation till the foreign suppliers reduce their prices in order to compensate (International monetary economics-a, n.d., p.4). The reason why countries devaluates is to attain a competitive position in comparison to its competitors through the reduction of prices of goods produced domestically below the level which is compatible with the purchasing power parity (International monetary economics-b, n.d., p.5). .

This would be followed by a critical analysis through the presentation of a critical literature on the above aspects through which it tries to present the impacts of exchange rates adjustments on the balance of payments of nations. The monetary approach This approach is based on the fact that the disequilibrium in the balance of payments is based on the monetary disequilibrium which is the difference between the amount of money that individuals want to hold and the amount of money that the monetary authorities supply.

In case the people want to hold more money, which exceeds the amount supplied by the Central Bank, then this would be met by a greater money inflow from abroad (Malik, 2006, p.2). The elasticity approach As per the views of Marshall, trade deficits lead to devaluation. Exports become more attractive in other nations. On the other hand the imports are made costlier in the domestic nation and this leads to the squeezing of the import bills. Trade deficits are thus eliminated in the process (Sharan, 2011, p.121). The traditional approach The traditional approach deals more with the current account or the trade balance of nations.

However, the approach does not consider the other components of the international accounts other than the current account. The balance of payments goes up along with the current account. However, since 1960s and the 1970s the traditional views have changed after studies emphasizing on factors determining the capital account flows (Arize, 2000, p.35). Critical Analysis Previous research reveals the importance of exchange rate fluctuations as a tool for international monetary regime. The comparison for seven of the largest non

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“International Monetary Economics Essay Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from https://studentshare.org/physics/1428471-international-monetary-economics
(International Monetary Economics Essay Example | Topics and Well Written Essays - 1500 Words)
https://studentshare.org/physics/1428471-international-monetary-economics.
“International Monetary Economics Essay Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/physics/1428471-international-monetary-economics.
  • Cited: 0 times

CHECK THESE SAMPLES OF International Monetary Economics

Financial Issues in BP Pipeline

Microeconomics and macroeconomics Name: Institutional Affiliation: Introduction The purpose of this research is to analyze various financial issues that face or faced BP pipeline related to micro and macro economics.... hellip; This will be achieved through analyzing concepts related to micro and macro economics on the various events.... Micro economics involves policies for enhancing equity and efficiency in the economy via the judicial and the regulatory mechanism....
5 Pages (1250 words) Essay

International Monetary Economics

International Monetary Economics Name: Institution: Course: Date: International Monetary Economics Abstract There has been a heated up debate the current issues arising on currency systems design internationally.... For this issues arising to be resolved, the whole system have to be reformed with much consideration on current international economics.... The meltdown of the international economic and financial systems can be blamed on two major factors: macroeconomic balances and regulatory failures....
7 Pages (1750 words) Essay

Consider how a currency appreciation might affect national income

Due to human nature, or more precisely according to the basic laws of economics, the local consumers will shift their demand from local goods to imported goods.... Currency Appreciation and National Income Customer Name Tutor Name Outline Introduction Currency Appreciation and National Income Currency Appreciation and Economic Growth Currency Appreciation and Employment Currency Appreciation and Inflation Conclusion References Introduction Currency appreciation is simply defined as “an increase in the value of one currency relative to other currencies” (Arnold 2008, p....
5 Pages (1250 words) Essay

Global Balance of Payments of the European Union

‘One of the aims of EMU was that only the global balance of payments of the European Union with the rest of the world be of importance and not those between members' Introduction The major states of the European provinces are controlled together in terms of certain policies that are framed and structured by the European monetary Union.... The monetary inflexibility of the policies in the EMU is becoming difficult when followed under the current economic operations of different nations....
7 Pages (1750 words) Essay

Efficient Market Hypothesis

)Efficient Market Theory is a field of economics, which seeks to explain the workings of capital markets such as the stock market.... )Efficient Market Theory is a field of economics, which seeks to explain the workings of capital markets such as the stock market....
9 Pages (2250 words) Essay

How Big is the Crowding-Out Effect of User Fees in the Rural Areas of Ethiopia

The regulatory authorities often employ fiscal policy, monetary policy or a combination of both to sway the economy back to a desired equilibrium position.... This paper is aimed at… explaining crowding-out using either the IS-LM or the Philips's curve and to show how it affects the economy as it is used as a tool for achieving economic objectives of monetary and fiscal authorities.... To achieve this objective, the IS/LM model will be employed to see how We begin by defining fiscal policy and monetary policy....
5 Pages (1250 words) Essay

Economic Theory in Context of Airline Industry

Transaction costs economics and the new institutional economics have provided ways in which traditional economics model… n the assumptions of maximising behaviour by individuals) can be used in understanding the relationship between institutions and the reform process (Craciunesco 2006).... Changes in investment activity, employment, and prices may be a recurring and frequent manifestation of This paper examines the economic profile of the airline industry paying attention to issues such as shifts and price elasticity of supply and demand, positive and negative externalities, wage inequalities and monetary and fiscal policies....
8 Pages (2000 words) Essay

Consider how a currency appreciation might affect national income

Factors such as relative product prices, monetary policy, inflation rate differences and income changes influence the appreciation of a country's currency (LIPSEY & CHRYSTAL, 2011 p 167).... Countries that implement restrictive monetary policies will be decreasing the supply of their currency hence currency appreciation....
5 Pages (1250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us