International Business Chapter 10

the use of gold at an established number of units per currency

the international monetary system in place from 1945 to 1971 with par value based on gold and the US dollar

specific cureence exhange equivalence upheld by government

stated value

the concept that a national currency that is also a reserve currency will eventually run a deficit, which eventually inspires a lack of confidence in the reserve currency that leads to a financial crisis

an internaitonal reserve asset established by the IMF, the unit of account for the IMF and other international organizations

rates that are allowed to float against other currencies and are determined by market forces

the 1976 IMF agreement that allows flexible exhange rates among members

perfect competition, no governemtn intervention

governments intereve in the currency markets as they perceive their national interests to be served

a country pegs the value of its currency at a fixed rate to another currency

a way managers protect against uncertainty

Institution for central bankers; operates as their bank. Secret.

foreign exchange

asset, usually currency held by a government's central bank

a currency used as a vehicle for international trade or investment

a currency used by a country to intervene in the foreign currency echange markets, often to buy (strengthen) its own currency

the exchange rates beween two currencies for delivery within two business days

trading market for currency contracts deliverable 30, 60, 90, or 180 dys in the future

the exchange rate between two currencies for delivery in the future, usually 30, 60, 90, or 180 days

price offered to buy

sale price

government policies that control the amount of money in circulations and its growth rate

policies that address the collecting and spending of money by the government

concept that in an efficient market, like products will have like prices

the process of buying and selling instantaneously to make profit with no risk

the relationship between real and nominal interest rates. The real interest rate will be the nominal interest rate minus the expected rate of inflation

concept that the interest rate differentials for any two currencies will reflect the expected change in their exchange rates

assumption that current market prices fully reflect all available relevant information

Assumption that the unpredictability of factors suggests that the best predictor of tomorrow's prices is today's prices

exchange rate prediction based on econometric models that attempt to capturethe variables and their correct relationships

an approach that analyzes data for trends and then projects these trends forward

Record of a country's transactions with the rest of the world