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 ________.

The monetary policy strategy that does not allow the policy to focus on domestic considerations is

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

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.

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

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

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 ________.

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

Under the Bretton Woods system,when a country adopted an expansionary monetary policy,thereby causing a balance of payments ________,the country would eventually be forced to implement ________ monetary policy.

The German central bank gained international reserves in the early 1970s because it sold ________ to prevent mark ________.

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

Because the United States was the reserve-currency country under the Bretton Woods system,it could run large balance of payments ________ without ________ significant amounts of international reserves.

The Policy Trilemma states that a country or a monetary union can't pursue the following three policies at the same time:

In the early 1970s,the U.S.ran large balance of payments ________,causing an ________ dollar and an ________ German mark.

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

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.

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

Hong Kong chooses to have ________ and ________ and therefore,cannot have an independent monetary policy at the same time.

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

Under an exchange-rate targeting rule for monetary policy,a crawling peg