Exam 18: The International Financial System

Under the Bretton Woods system,a country running a balance of payments ________ lost international reserves,and had to implement ________ monetary policy to strengthen its currency.

Explain an additional disadvantage for a country undergoing dollarization compared to a currency board or other exchange-rate targeting regimes.

Under the Bretton Woods system,the United States was designated as the

Everything else held constant,if a central bank makes an unsterilized sale of foreign assets,then the domestic money supply will ________ and the domestic currency will ________.

Everything else held constant,if a central bank makes an unsterilized purchase of foreign assets,then the domestic money supply will ________ and the domestic currency will ________.

Under a fixed exchange rate system,countries that ran large,persistent balance of payments deficits would ________ international reserves,thereby pressuring them into ________ their exchange rate.

A current account surplus indicates that America is ________ its claims on foreign wealth,while a deficit indicates that this country is ________ its claims on foreign wealth.

Because sterilized interventions mean offsetting open market operations,there is no impact on the monetary base and the money supply,and therefore a sterilized intervention

Because central banks have not been willing to give up their option of intervening in the foreign exchange market,the current international financial system can best be described as a

The Bretton Woods agreement created the ________,which was given the task of promoting the growth of world trade by setting rules for the maintenance of fixed exchange rates and by making loans to countries that were experiencing balance of payments difficulties.

An emerging market country that successfully used exchange-rate targeting to lower its inflation from above 100 percent in 1988 to below 10 percent in 1994 (before devaluation)was

The Bretton Woods system broke down in the early 1970s for all but one of the following reasons:

Explain the 1992 crisis that led to the breakdown of the European Union's Exchange Rate Mechanism.What disadvantages of exchange-rate targeting were exhibited during this crisis?

When a country forgoes its own currency and starts using another country's currency as its own,we say that this country has

Under a fixed exchange rate regime,if the domestic currency is initially ________,that is,________ par,the central bank must intervene to sell the domestic currency by purchasing foreign assets.

When the domestic currency is initially overvalued in a fixed exchange rate regime,the central bank must intervene in the foreign exchange market to ________ the domestic currency,thereby allowing the money supply to ________.

Suppose that the Bank of Japan buys yen-denominated assets with U.S.dollar assets.Everything else held constant,this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S.monetary base.

A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal decline in its international reserves and the monetary base,everything else held constant.

Exchange-rate targeting allows a central bank to ________,thus this will ________ the probability of policy developing a time-inconsistency problem.

The World Bank is an international organization that: