Exam 18: The International Financial System

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

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.

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

Under exchange-rate targeting,the central bank in the targeting country ________ lose the ability to pursue its own independent monetary policy and any shocks to the anchor country is ________ transmitted to the targeting country.

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.

The United States chooses to have ________ and ________ and therefore,cannot have a fixed exchange rate at the same time.

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?

Since the abandonment of the Bretton Woods system,balance of payments considerations have become ________ important,and exchange rate considerations ________ important in the conduct of monetary policy.

Which of the following is not a disadvantage of exchange-rate targeting?

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.

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

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

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

If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.

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 depreciate.