Exam 18: The International Financial System

A capital ________ can promote financial instability in an emerging-market country because it can lead to a lending boom and excessive risk-taking on the part of banks,which helps trigger a ________.

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

Countries with balance of payments deficits do not want to see their currencies ________ because it makes foreign goods ________ expensive for domestic consumers.

In response to the overvalued dollar in the early 1970s,the German Bundesbank bought ________ and sold ________ to keep the exchange rate fixed,gaining international reserves.

Everything else held constant,if a central bank makes a sterilized purchase of foreign assets,then the domestic currency will

A central bank's attempt to prevent an appreciation of its currency can stimulate domestic inflation if the ________ of foreign currencies leads to ________ international reserves which ________ the monetary base.

Under the Bretton Woods system,the IMF could encourage ________ countries to pursue ________ monetary policies that would strengthen their currency or eliminate their balance of payment deficits.

Under the current managed float exchange rate regime,countries with balance of payments deficits frequently do not want to see their currencies depreciate because it makes ________ goods more expensive for ________ consumers and can stimulate inflation.

A country that dollarizes

When the domestic currency is initially undervalued 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 ________.

The seignorage for a government is greater for ________ than for ________.

Under a fixed exchange rate regime,a central bank that does not want to acquire international reserves to keep its currency from ________ will decide to ________ its currency.

A case for capital inflow controls can be made because capital inflows

Under the Bretton Woods system,the organization assigned the task of making loans to countries that were experiencing balance of payments difficulties is known as the

Under a fixed exchange rate regime,if the domestic currency is initially overvalued,that is,below par,the central bank must intervene to purchase the ________ currency by selling ________ assets.

A balance of payments ________ is associated with a loss of international reserves,while a balance of payments ________ is associated with a gain.

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

Everything else held constant,if a central bank makes a sterilized sale of foreign assets,then the domestic currency will

Two reasons for an industrialized country to adopt an exchange-rate targeting regime are if the country ________ conduct successful monetary policy on its own,and if the country wants to ________ integration of the domestic economy with its neighbors.

A balance of payments deficit is associated with a ________ of international reserves,while a balance of payments surplus is associated with a ________.