Three types of convertibility regimes
hard pegs (25 countries): fixed exchange rates with a currency pegged o to another currency (‘anchor currency’, eg the US-Dollar), o to a currency basket, o or to gold (‘gold standard’)
intermediate regimes (‘soft pegs’) – 83 countries (China)
floating (flexible) exchange rates, determined by supply and demand on the markets (65 countries, Western States including the US and the Eurozone, Russia)
Currency manipulation
Currency manipulation is when a country intentionally influences the exchange rate of its currency to gain economic advantages.
Buying foreign currency (e.g. USD): → Increases demand for foreign currency → Increases supply of domestic currency → Domestic currency weakens (depreciates) → Goal: Boost exports, support domestic economy
Selling foreign currency: → Increases supply of foreign currency → Reduces domestic currency in market → Domestic currency strengthens (appreciates) → Goal: Make imports cheaper, fight inflation
IMF Main Functions
coordination and monitoring of monetary policies, especially exchange rate policies. → countries should manage their currencies wisely and cooperate
support for countries with economic problems → the goal is a stable currency system and free exchange of currencies, which are the key foundations of the international monetary system
IMF Primary Aims
IMF Characterstics
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