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Business & Marketing Essay: Currency report

Essay Instructions:

Currency report



Introduction due on OCTOBER 12.



What currency do you want to analyze?

Why you have chosen that currency?: personal interest? personal interest? Financial interest?

What is the time frame: Months, years, Weeks?

That is the time covered: At least 20 years of data

Web page you are getting the data from: See announcement with different web pages

Present the graph to identify possible difficulties

* Analysis: Due TBA



You have to analyze the standing of your chosen currency making sure your elaborate your analysis referring to the following questions:

QUESTION 1. Research the history of your currency to Identify and explain any currency conflicts and currency war, and which were the policy options used to deter the currency conflict (Bergsten and Gagnon)

AS A SUMMARY: please remember we have covered three currency conflicts. All three shared the same path of events:

a background that lead to a currency conflict:

Devaluation or non-appreciation due to a number/series of historical, political and economics situation and cirsncunstances

Government officials that complain and take to solve the currency conflict

How they tried to solve this: which measures were used to solve the currency conflict?

CWI: Monetary policies

CWII: trade policies

CWII: on the making

Was there a currency war despite the efforts?

What was the final outcome?

NOW: Based on this information: QUESTION 1: Was/is your currency part of any of the currency wars (Richards)? If so, please identify dates, reasons, political and economic debates, outcomes.

Please explain if your currency/country engaged in any currency conflict

Was it a competitive devaluation or a non-appreciation of the value?

Time period

percentage

Effects on the economy of both countries: employment/unemployment, trade balance, inflation.

who/government official in charge of solving the issue?

Which policies were used? Fiscal, monetary, trade, unilateraly, multilateraly

How long did it last?

Any agreements signed? how was this conflic/wart solved?

What do you think about the handeling of the currency conflict/war? what would you have done differently?

QUESTION 2: Is your currency consider an international currency? (Cohen chapter 1 and Cohen Chapter 4)



a. Referring to Cohen Chapter 1 and chapter 4 please answer these question:

what is an International currency? Please use the readings to define it.

What are the motivation to become international? please use the readings to explain it

How is the internalization process? please refer to the readings

How does the Gresham's law applies? please refer to the readings

What are the Political and economic factors that help with the internalization process? Please refer to the readings

b. IS YOUR currency an international currency?

If Yes: Explain why

If No: Explain why and identify the reason/s why your currency is not considered an international currency

Non-full currency body, inconvertible, appeal? please explain

QUESTIONS 1: DUE ON NOV 2.

QUESTION 2: Due NOV 9

QUESTION 3. How is your currency financing international trade? ( Cohen Chapter 4 and Eichengreen et al. chatper ....)

QUESTION 4. How/what is the status of your currency as a reserve currency? (Cohen Chapter 4 & Eichengreen et al. chapters....)

* Conclusions and Final words



Please present your thoughts on how do you think has been the handling of the currency crisis and/or war and what would you have done differently and why.



* Work Cited



This is a research paper and, in order to avoid plagiarism, please make sure you cite your sources both in-text and in the bibliography.

Do the question 1 only and the q1 due on nov 11

Essay Sample Content Preview:

Currency Report
Author's Name
The Institutional Affiliation
Course Number and Name
Instructor Name
Assignment Due Date
Currency Report
Summary
The currency war that lasted from 2009-2011 was an important economic event that shaped the present-day global economies. The primary tussle was between China and the US, both superpowers (Bergsten & J E, 2017). The undervalued RMB launched a series of events that are still affecting trade between these two nations. An artificial exchange rate valuation can temporarily benefit an economy, but this act has long-term consequences that a country must evaluate before practicing such a policy. There is no doubt that China increased its domestic activity significantly by intervening in the exchange rates, but it must also be considered that people involved in the import business in China also suffered. The negotiation led by the IMF failed miserably as no decision was made as the debates reached an impasse. China and the US both depend on each other in imports and exports. China's compulsive devaluation can lead to drastic consequences in trade and other aspects because the US remains at the top of the financial world.
Background
China has been a part of a currency war with the US from 2009-2011. China's exchange rate policy had been the topic of a significant debate between analysts and the International Monetary Fund (IMF).
Competitive Devaluation
I choose this currency because it greatly impacted the decisions that the US made regarding its exchange rate policy. Furthermore, other countries with emerging market economics like Asia and Latin America had to suffer significantly because of this compulsive devaluation (Murphy and Yuan, 2009). Compulsive devaluation means that different countries lower the value of their currencies to promote their domestic currency. This artificial devaluation results in an increased amount of exports and the imports decrease drastically. The time frame that I will cover in this assignment is three years, which is from 2009-2011. Being a major superpower in the world, China benefited significantly from the devaluation of its currency. The country's economy thrives on the export of goods. Since China devalued its currency, the Asian market giants had to lower the cost of their exports to gain a competitive market advantage (Bhalla and Qiu, 2004). A lower currency value made the cost of imports higher, which ultimately resulted in people buying country made products that boosted the domestic industry ("Dollar Yuan exchange rate - 35-year historical chart," n.d.)
.
(Macrotrends, 2020)
The Chinese Yen Currency War
Before 1994, China had adopted a more stable currency policy. It implemented a dual exchange rate strategy, which meant that the Chinese markets' imports and exports would determine the exchange rate (Huang & Wang, 2004). The foreign exchange was kept restricted in order to limit imports. As a result, this caused the extensive use of black market foreign exchange services exploiting individuals. Before 2009, the two exchange rates used were an unpopular move, which was criticized by many countries. In 1993, the official exchange rate was 7.77 Yuan per dollar, and the artificial rate in the swap market was kept at 5.70 Yuan (Leung, 2010). Since this policy was unpopular, China unified its exchange rate at 8.7 Yuan per dollar (McKinnon & Schnabl, 2009). The currency appreciated by little margins in the upcoming years after 1994.
Policies Applied to Resolve the Issue
2005: China Reforms the Peg
Later in 2005, China altered its policy and stated that the exchange rate would fluctuate according to the market's supply and demand (Yip, 2011). This meant that the Chinese Yuan would be valued at 8.11 instead of 8.28. From 2005 to 2008, China intervened in the market extensively to depreciate its currency artificially, and a significant difference in exchange rates was seen (Gregory, 2009). An appreciation of 18.7 % was seen in the RMB-US Dollar exchange rate, and it had a considerable impact on imports and exports of both the superpowers.
2008: Appreciation Halted:
After constant appreciation until 2008, China paused its appreciation policy in mid-July 2008 (Goldstein and Lardy, 2014). The reason for this halt was the decline in the demand for its products. The reason for a lower demand was the global financial crisis that occurred in 2009. The global financial crisis was a direct hit to China's economy, leading to a 15.9% decrease in overall exports from the previous year. As a result, the domestic industry suffered miserably, and hundreds of factories were shut down because of this recession. An estimated 20 million workers lost their jobs because of this global crisis (Li et al., 2012). The government of China intervened again and paused its appreciation policy, and it was seen that the exchange rate was kept constant to prevent any further damage. It was seen that the RMB-US Dollar exchange rate was kept constant at 6.83 throughout mid-June 2010 (Leung, 2010).
(Morrison & Labonte, 2013)
An Economic Perspective
To accurately analyze the currency war that China was compulsively involved in, an economic perspective must be discussed. Economists generally oppose the idea of implementing the policies that affect the exchange rate of a country. The artificial devaluation or appreciation in a currency is a distortion in the economy. The exchange rate should move freely when economic conditions change in a country, as this aids in improving economics worldwide. If t...
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