Exam 19: The International Financial System

Explain how an unsterilized purchase of foreign assets impacts the exchange rate everything else held constant.

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 ________.

The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the ________.

A capital ________ can promote financial instability in an emerging-market country because it is what forces a country to ________ its currency.

Because many emerging market countries have not developed the political or monetary institutions that allow the successful use of discretionary monetary policy, ________.

An advantage of an international lender of last resort is its ability to prevent ________, in which a successful speculative attack on one currency leads to attacks on others.

Which of the following is not an advantage to exchange-rate targeting?

When gold production was low in the 1870s and 1880s, the money supply grew ________ causing ________.

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.

An international lender of last resort creates a serious ________ problem because depositors and other creditors of banking institutions expect that they will be protected if a crisis occurs.

Under a fixed exchange rate regime, a country that depletes its international reserves in an attempt to keep its currency from ________ will be forced to ________ its currency.

Under a fixed exchange rate regime, if a country has an overvalued exchange rate, then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

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

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

A monetary policy strategy that uses a fixed exchange rate regime that ties the value of a currency to the currency of a large, low inflation country is called ________ targeting.

Under a fixed exchange rate regime, if a country's central bank runs out of international reserves, it cannot keep its currency from ________.

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

An advantage to exchange-rate targeting is it helps keep inflation under control by tying the inflation rate for ________ traded goods to what is found in the ________ country.

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

Under the Exchange Rate Mechanism of the European Monetary System, when the German mark depreciated below its lower limit against the British pound, the German central bank was required to buy ________ and sell ________, thereby ________ international reserves.