Chinese Yuan 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.
Answer q2 only in 5 pages and keep using my currency Chinese Yuan
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Chinese Yuan Currency Report
International Currency
An international currency serves the functions of money across different borders at a personal and official level. On a personal level, the global currency is used in foreign exchange trading because of its network quality in the foreign market (Cohen, 2018). The money becomes applied in trade invoicing and settlement, where it is the monetary unit for the exchange of goods and services at the global level. An international currency becomes an investment medium in the financial markets, thus offering a widening range of currency choices. Currently, half of the world's export transaction is in US dollars (Cohen, 2018). However, an international currency serves three primary functions at the official level: exchange rate anchor, as an intervention currency, and finally, as a reserve currency.
Motivation to Become International Currency
A country becomes motivated for its currency to attract international use because it gets used outside its borders as a medium of exchange, store of value, and unit of account either at a private market or official policy levels (Cohen, 2018). From an analytical point of view, when there is one or a few currencies used in different states, transaction costs reduce due to scales' economies. The reduction results from eliminating the expenses incurred on searching and bargaining for currencies' interconversion in different countries. Currency globalization creates money network links, hence creating an interdependence in money functions. Therefore, one actor's role in the trade transaction process depends on other actors' roles within the same agent. Thus, currency usefulness becomes enhanced when used within a large geographical region, crossing borders (Cohen, 2018). In the process, the currency value gets enhanced hence broadening its appeal as a store of value.
According to Swoboda, the citizens of a country whose currency gets used internationally experience transaction costs, thus enjoy more profit in the banking sector than those in other countries (Cohen, 2018). At the same time, the residents have ease of expanding business abroad at a lower cost. Additionally, the country experiences macroeconomic flexibility. From a political perspective, there is leverage where the issuer uses either countries dependence on its currency to exercise sanctions to adversaries and offer loans to friendly countries (Cohen, 2018). Therefore, the issuer can exert pressure or control the countries using their currency. Additionally, the issuing country gains reputation hence has a say on global issues from the status and prestige created by its money. In other words, the countries that depend on the currency pledge some allegiance to the issuer; hence it has the upper hand in making decisions at the global level.
Internalization Process
Internalization occurs when a small percentage of popular money from specific countries becomes acceptable for money functions beyond their geographical borders (Cohen, 2018). Hence, the force of competition selects the chosen currencies expanding their territorial domains through a similar Darwinian process where survival is for the fittest. Generally, the internalization process usually begins in the private sector, followed by the public sector (Cohen, 2018). When a currency gets intensively used by the private actors, the governments become enticed to follow suit by using it as a reserve currency, anchoring exchange rates, and intervention medium.
Application of Gresham's law in Internalization Process
Gresham's law applies in the internalization in reverse; hence, instead of the lousy money eliminating the good money in the market, the contrary happens; thus, the good money phases out the market's bad money (Cohen, 2018). This process follows a set of rules that should get fulfilled before declaring a given currency to become international. The conditions set have maximum clarity and transparency such that only countries with stable governance and respect for the rule of law qualify. Hence, good money from stable countries control international trade instead of lousy money, as postulated by Gresham's law.
Political and Economic Factors that help with the Intern...