A 9 page paper that discusses foreign exchange rate. The paper reports the agencies responsible for the exchange rate policies in the U.S., the three types of policies, and which type is recommended for the U.S. A brief historical overview of the dollar for the last two decades is provided in general terms, along with what happens when the dollar decreases or increases in value. The writer comments on the EURO and the yen. The writer also comments on the U.S. authorities ability to use intervention and recommends they do so at this point. Bibliography lists 7 sources.
Name of Research Paper File: MM12_PGxchnd.rtf
Unformatted Sample Text from the Research Paper:
Based on the information presented regarding the impact of exchange rates on the world economy, it would seem that the United States needs to take certain steps to stabilize the
value of the dollar in the world market in such a way that will be advantageous to the American economy. There are basically three choices for monetary exchange rate policies:
* Allow the currency to float freely in the exchange markets against all other currencies (Bergsten, 1999). * Fix the price of national currency against a specific foreign currency or
group of currencies (Bergsten, 1999). * Use a combination or intermediate approach, such as letting currency rates to float to some extent but intervene to limit the fluctuations, such as
intervening when the exchange rate reaches a predetermined rate (Bergsten, 1999). The third method is being recommended. Establish a specific target for the exchange rate and then take steps
to bring the exchange rate to that level. A brief historical outline may help to justify this suggestion. Money, or capital, is a commodity in todays global market,
countries buy and sell currency (Varian, 2004). Given the high deficit of the United States at this time, other governments, like the Japanese government, are buying U.S. debts. On the
other hand, the Bank of Japan sells its own currency on the foreign exchange market for the purpose of keeping the value of the yen low. This is one of
the factors affecting the trade deficit between the United States and Japan. The dollar has had ups and downs over the last two decades. If the value of the
U.S. dollar seemed to hold an unusually strong position in the currency exchange market, it was most likely because other nations held their currency from appreciating against the dollar (Varian,