Abstract This document discusses the Euro markets within the European Union vis-a-vis the Euro currency. The paper examines the currency itself, its management, as well as the individual markets. Finally, the paper makes several observations regarding the macroeconomic impact of the euro as well as how companies utilize currencymarkets for competitive advantage. The Euro is now considered a hard currency.
From the Paper "Familiarity with the Euro currency markets is vital in the current global market. The implementation of the Euro currency required careful and lengthy planning. The exchange rates at induction of the Euro was particularly problematic considering the sheer variety of national currencies that were being converted over and the variance of existing exchange rates whereby a complex system of triangulation between currencies, exchange rates, and fixed rates (Mundell, 2003). Thus, on January 1, 1999 the Euro was introduced to the national economies of the member states of the EU in 11 of the 12 countries. However, this was just a partial introduction since Greece failed to meet the strict requirements which involved deficits: "On January 1, 1999, the Euro will become the official currency for banking purposes of 11 of the 15 member states of the European Union..." (Walker, 1998, para.6)."
Abstract This document discusses the characteristics and attributes of hard and soft currencies. The paper identifies hard currencies as positive investment targets and are typically associated with stable economies and politically stable markets. The paper further discusses how soft currencies are most often associated with emerging markets and are typically avoided by investors because of their negative practices such as issuers often pegging such soft currencies to hard currencies which serves to destabilize world currencymarkets.
From the Paper "Hard and soft currencies as well as knowledge of them are vital in the global economy. How international currencies interact is a strategic consideration for corporate bodies with operations in more than one area, country, or region in matters such as hedging for risk or in repatriating revenues. A hard currency is typically referred to as the currency of a leading economy and one that is widely accepted in all markets as a common form of payment, such as the U.S. dollar, the Swiss franc or the British pound (Carrada-Bravo, 2003, p.17). Additionally, hard currencies, or currencies classified as hard in character are especially liquid on foreign exchange markets where they are actively traded. Another perspective of hard currencies is that they are normally associated with politically, economically, and socially stable countries (Laulajainen, 2003, p.44)."
Abstract In this paper, the author explains what currency carry trades are. He uses the yen as a prime example of a currency carry trade and talks about its lasting period of 3.5 years. The author discusses the highs and lows of the yen and also the dollar, and the reasons behind it. The author explains the logic behind the currency carry trade and how it can happen. The author then proceeds to discuss the interest rate differentials which help to understand the changes in the currencymarkets. The author concludes with his opinion that if the Euro carry trade is happening now and lasts as long as the yen and dollar carry trades, then the Euro will continue down until sometime in 2008.
From the Paper "In fact, from April 1995 to July 1998 the Japanese currency went from 80 to 147 yen per US dollar, a period of 3.25 years and a loss of 66% purchasing power. From August 1990 to September 1995 the Bank of Japan had lowered the Official Discount Rate from 6% to 0.5%. The US 3-month TBill rates were between 5% and 6% and longer duration bonds over 7%. Thus was born the "yen carry trade."Of course this ended sadly in 1998 when the dollar fell by about 9% in the period between August 31 and September 7, 1998 and then by a further 12% on October 7 and 8. That was the end of the yen carry trade."
Abstract This paper defines derivatives as financial instruments such as options, futures, forwards and swaps that are derived from their underlying currencies. The returns on derivatives are tied to yields of these underlying securities and currencies. This paper details the essential role the derivatives market plays in the global economy in countries such as Asia, Germany and Switzerland, in which these economies reap substantial growth rates due to these financial practices. The writer contends that with the presence of this market the financial condition of business entities are stabilized and secure from the possibility of hedge currency risks. The derivatives market also decreases the amplitude in the fluctuation of spot prices and promotes optimal funds placing. The writer stresses the importance in the implementation and development of the currency derivatives market as a necessary prerequisite for the growth of international trade volume, expansion of foreign investment and for the general development of economy.
Table of Contents:
Abstract
Currency Derivatives Operations in the World Economy
References
From the Paper "Derivatives market in Ukraine was operating from 1994 to 1998. Unfortunately, its work was far beneath the world standards. From the very beginning the Ukrainian market was developing as an exchange market, despite the fact that the world derivatives development gained the incentive to growth from over-the-counter form of these instruments. Hedgers, a category of market subjects, almost did not participate in the activity of Ukrainian currency exchanges, and the absence of hedgers makes the market non-balanced and not liquid. Moreover, the world financial crisis of 1997 caused the collapse in currency markets. The National Bank of Ukraine made a decision to hold up and later to abolish the functioning of currency derivatives in Ukraine. We would like to underline that despite the crisis in the Russian market, the operations with currency derivatives were not stopped, but continued to develop."
Abstract This paper looks at the currency crisis in Thailand, which started in the summer of 1997 and rapidly engulfed a number of East Asian "Tiger economies" in a major financial crisis. This crisis became a an interesting case study for economists who were interested in analyzing the pros and cons of globalization and laissez faire market economies. The author further examines the effects of the East Asian currency crisis, on Thailand itself, which underwent a painful re-adjustment of its economy.
Outline:
Background
The Danger Signals
Foreign Exchange Reserves
Current Accounts Deficit
Excessive Credit Expansion
Why Did the Growth Slow Down?
The Housing and Real Estate Bubble
The Stock Market Bubble
The Crisis
The Aftermath of the Crisis for Thailand
Conclusion
From the Paper "The country took a number of measures to attract foreign capital during the 1980 and early 1990s. These included lifting of restrictions on foreign investments, elimination of most barriers on foreign ownership of export oriented industries, granting of tax incentives to foreign mutual funds and investments in the stock market, creation of closed-end mutual funds, and reduction of taxes on dividends remitted abroad (Antczak 40-41). These measures along with a pegged exchange rate policy (i.e., the Thai currency baht was pegged to the dollar and its value rose and fell with dollar's value), and the large differential in interest rates provided comfort to foreign investors who came to Thailand in droves. "
Tags: Thailand, currency, crisis, globalization, Asia
Abstract The paper discusses how foreign exchange loans always present a risk to the borrower. The paper focuses on a case involving the American Rondo Company taking out a foreign currency loan with the Swiss Bank. The paper relates that if the Rondo company is careful to monitor and evaluate changes in the market, or it goes through a managed foreign currency loan, many of these risks can be reduced, if not eliminated.
From the Paper "A foreign currency loan is a loan in which is repayable in a currency other than the currency of the country in which the borrower is a resident in. In the Rondo Company case sample, the company has a financing option to take out a foreign currency loan with the Swiss Bank. Typically the interest rate charged on a foreign currency loan is based on the interest rates applicable to the currency that the loan is denominated, or issued, (in this case, the Swiss Franc) and not the interest rates that apply to the currency of the borrower's country of residency (The U.S. Dollar). Under this scenario, the foreign currency loan with the Swiss Bank could be beneficial because the interest rate on the foreign currency in which the loan is based on is significantly lower than the rate that the borrower can get on a loan borrowed in his or her own resident country's currency system."
This paper discusses the position of the dollor as related to other currencies in the global currencymarket: Background, devaluation, effect on trade, reserves, interest rates and future.
1,350 words (approx. 5.4 pages), 7 sources, 1995, $ 47.95
From the Paper "Currency takes on a life of its own in the international trading markets. Aside from the value that governments place on their currency, international traders place value that ultimately determines how much any given currency can buy. In recent months, there has been increased attention given to the volatility of the world's currencies, with particular attention given to the American dollar, the Japanese yen, the Deutchemark, and the Mexican peso. This research examines the recent devaluation of the American dollar, the recent performance of the British pound and potential ramifications on the American and world economies.
The Japanese yen, German mark and American dollar are generally considered the world's strongest currencies. Merchants and governments expect these currencies to ... "
Abstract This paper will probe further into the issue of risk in derivative contracts. A special focus will be given to forward exchange rates in currencymarkets. This is an increasingly active and volatile arena that is both interesting and important to study. Currency flows each day total well over 1 trillion dollars (US), greatly exceeding the actual value used for foreign trade. Other derivative contracts used by corporate investors will also be considered. In the final analysis, it is clear that all financial instruments are derivative contracts in one form or another. What separates them is the degree of volatility and risk. The riskier the financial instrument, the more difficult it is to establish forward rates.
Abstract With increased globalization of the Indian economy, Reserve Bank of India's task of sterilization of inflows has become tough. There are costs attached to the sterilization operations. This paper analyzes the performance of this activity of the RBI and the benefits and costs of these operations. It tries to evaluate whether these operations are able to achieve the goal of keeping the inflation rate under check. It further discusses the justification for continuing these operations by the RBI and finally puts forth a case for establishing a Market Stabilization Fund in India. The paper foresees the future challenges that are likely to be faced by the RBI in view of the increasing inflow of foreign currency. As a corollary it also discusses the need to maintain large Forex reserve and the need to utilize a part of the reserve for investment in domestic sectors like infrastructure, health and education.
Outline
The Debt Stability Condition
Crowding Out, Fiscal Deficit, Absorption and Sterilization
Efficacy of Sterilization Operations
Policy Implications
Challenges to Financial Stability--Concluding Remarks
From the Paper "To overcome the great difficulties faced by the RBI to curb inflation due to excessive monetization, RBI, in 1997 reduced this mode of deficit financing to a considerable extent and resorted to Market Stabilization Scheme under which the GOI and RBI signed a MoU detailing the modalities of the MSS. This scheme came into effect from April 2004. Under the MoU the GOI would issue Treasury Bills and/or dated securities under the MSS in addition to normal borrowing requirements, for absorbing liquidity from the system. These securities will be issued by way of auctions to be conducted by RBI. These securities will be eligible for SLR and LAF operations also. Another very important feature of the scheme is that the payment for interest and discount will not be made from the MSS Account. "
Abstract This paper reviews ten articles on the currency crises of the past 20 years. The paper examines the global impact a crisis in one country or area has on the world, such as the Asian currency crisis of the 1990s, and discusses the notion that currency crises are self-fulfilling. The paper also looks at whether currency crises are predictable.
From the Paper "Currency crises have gained much attention in the past years because they have apparently occurred with greater frequency than in the past or perhaps because the global nature of today's financial markets make a currency crisis in one nation a concern around the world. Increasingly, currency stability is of interest to more than just economists and policy makers, with companies and individual investors noting the movement or stability of various currencies with interest .These are not necessarily new stakeholders with regard to..."
Tags:Currency crises, currency crisis, literature review
A discussion on "In Commentary: The Potential of Chaos Theory and Complexity Theory for Health Services Management", by Margaret Arndt and Barbara Bigelow.
1,350 words (approx. 5.4 pages), 1 source, 2005, $ 53.95
Abstract This paper examines Margaret Arndt and Barbara Bigelow's book which discusses the relevance and potential of the chaos and complexity theories in terms of improving health services management in the United States. It highlights that reevaluating professional knowledge and assumptions in a field as complex as health care can be unsettling, but it can also invigorating.
From the Paper "In "Commentary: The Potential of Chaos Theory and Complexity Theory for Health Services Management", Margaret Arndt and Barbara Bigelow examine the relevance and potential of these theories in terms of improving health services management in the United States. They emphasize that reevaluating professional knowledge and assumptions in a field as complex as health care can be unsettling, but it can also invigorating. Because of the potential benefits of such an approach, Arndt and Bigelow (2000) argue in their article that applying chaos theory and complexity theory to health services management is worthy of pursuit, despite potential controversy or disputes regarding the validity of this approach. Since America's health care system is plagued by inherent complexity and chaos, applying ..."
Abstract This paper examines the complex challenges facing the health care system in the United States as discussed by Shari Myce in her book. It emphasizes that giving up control and embracing uncertainty can lead to surprising creativity. The paper explains that she acknowledges that like most managers and people in authority, health care leaders instinctively equate uncertainty and chaos with management failure, and feel compelled to assert control and be proactive.
From the Paper "In "Teetering on the Edge of Chaos" Shari Mycek examines the complex challenges facing the health care system in the United States and emphasizes that giving up control and embracing uncertainty can lead to surprising creativity. She acknowledges that like most managers and people in authority, health care leaders instinctively equate uncertainty and chaos with management failure, and feel compelled to assert control and be rigidly proactive. Unfortunately, such efforts can be counterproductive, disruptive, and increase chaos and uncertainty instead of reducing them. Consequently, Mycek (1999) argues that uncertainty should be capitalized upon when it occurs, for uncertainty and disagreement can "breed creativity and innovation." In her view, "complexity principles can guide us in ..."
Abstract This is a comprehensive look at the oil market. Topics covered include: Europe's Monetary targets, Euro strengths and weaknesses, Euroland, energy use and oil balance, the oil marketcurrency risk, Euroland's oil market interests, the Euro, oil and U.S. interests.
From the Paper "The euro has the potential to put an end to the U.S. dollar hegemony in world trade and finance, so far not disputed. The euro has, however, little chance of establishing its own hegemony comparable to that of the U.S. dollar. After a period of competitive substitution, there will be a competitive coexistence between the euro and the dollar. The Brent market largely determines oil prices in the Atlantic, the Mediterranean, the Gulf, and even Asia."
Abstract This paper examines the reasons why the Federal Reserve Open Market Committee at its October 2000 meeting decided to leave the Federal Funds Rate target (and by extension the money supply target) unchanged as well as looking at what might have prompted the Fed Open Market Committee to increase the Federal Funds Rate or Discount Rate as well as what might have prompted them to decrease the Federal Funds Rate or Discount Rate ? and what other actions might have accompanied either an increase or decrease.
From the paper:
"To understand the Fed's decision in October it is necessary to understand how the office functions in general. As the central banking authority of the United States, the Federal Reserve acts as a fiscal agent for the U.S. government; it also serves as custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. The system comprises the Board of Governors of the Federal Reserve System, the 12 Federal Reserve banks, the Federal Open Market Committee, the Federal Advisory Council, and, a Consumer Advisory Council along with several thousand member banks. The Board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established by the 12 Federal Reserve banks, and reviews the budgets of the reserve banks."
A discussion on what investors today want to see on a global basis, how markets reflect discounts from their highs and stock purchases in highly discounted markets as an overall strategy.
Abstract An examination of the many factors investors in global stock markets will have to consider in the next millennium, including whether the value of their shares is driven by the rational estimation of future corporate earnings or whether mass psychology and speculative mania drive the value of their investments. The writer contends that in either case, factors of risk, globalization, currency, regulation and trade will come into play, either in consideration of their effects on social factors, or in the possible or probable profitability of any stock or stock market in an increasingly international environment.
From the Paper ?As monetary, political, trade and other restrictions are eased in countries all over the world, more investors find themselves able to contemplate maximizing their returns in international financial markets or on foreign companies listed on domestic exchanges ? the capital markets have become global; currently, more than 300 companies from fifty countries trade their shares on the NYSE, and are worth about ten percent of the market value of U.S. equities (International Monetary Fund, 1999).Growth in foreign trade and financial activities has rapidly led to closer integration of financial markets around the world. Deregulation, privatization and liberalization has led to an increasing number of markets, banks and brokerage firms, and increased the volume of asset exchange and ownership on a global scale. Facilitated by technology allowing for real-time trading all over the world, globalization of financial and trade markets has been a source of economic growth and prosperity for investors, countries and corporate entities in even the remotest developing areas.?
