How to Increase the Value of Malaysian Ringgit
Based on our findings, we reached into the conclusion that there a two significant ways to improve, stabilize and probably increase the value of Malaysian Ringgit internationally. First, the government should maintain the policy of open economy and also considering the usage of gold dinar in the currency system instead of fiat monetary system.
Maintain the Policy of Open Economic
Malaysia is a small and open economy which involved heavily in international trade. The economic theory suggested by Dornbush (1974) highlighted that the elimination of tariff (greater trade openness) will cause currency depreciation by reducing the price of exportable goods and increase the price of importable goods.
Since the results showed that open economic policy can cause the depreciation of RM/USD, Malaysia should maintain the policy of open economic. Open economic policy has successfully raised Malaysia position in the international trade. Currency depreciation increases the competitiveness of Malaysia exporters and encourages domestic producer and importer to venture into cost effective production mode to save costs. Although increase in Malaysia trade balance tends to depreciate RM, but the control of Malaysia on the trade balance is limited as the increase in trade balance depend on the purchasing power of the foreign importers and the competitiveness level too.
Results also indicate that increment in domestic interest rate will dampen our exchange rate and increase in money supply, on the other hand, strength the RM. This finding shows that monetary policy is a useful tool in controlling the movement of Malaysian Ringgit. While increase in the interest rate could cause further capital inflows tha...
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...ry. The three main factors are the use of gold and silver as a currency, to avoid currency devaluation, and to limit printing of loose money (fulus).
In addition, manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus, has an intrinsic value. Dr. Mahathir Mohamad said that gold was also open to some risk of speculation but it was safer than conventional currency which had no intrinsic value and could be manipulated indefinitely (The Star, 2002). All these problems arise because the world went off the Gold Standard. In the International Conference on Gold Dinar Economy 2007, Tun Dr Mahathir noted that in the case of paper people will have risk in losing their value and also purchasing power. He stressed back that only Gold Dinar really has a value in it.
He states that the financial system was based on competing state banks with no central bank which promoted a rapid economic growth. As the American banking system developed the money supply developed with it. The federal government began the banking system through the issuing of specie but as the capitalist system developed the banking structure developed as well. During the Civil War, the North printed Greenbacks that drove gold from the domestic circulation to help pay for war necessities. The Greenbacks, however, were rarely used in the South expressing the different economies of the North and the South at the time of the Civil War. With differing economies and the growth of specie and paper money, Brands argues that the basis of knowledge about the money system of this time lays a foundation for how Carnegie, Rockefeller, and others were able to manipulate the market and gain wealth. Leading into price manipulation by those in corporate
world began to use this item as a means of currency. Leading in the production of this element
Secondly, the existence of merchant may maintain the stability in border areas (South-East). And the oversea trade is also an extremely part of the tribute system that can display China’s powerfulness. Lastly，the author calls for lax of business environment and tax policy with the expectation of trade
The use of foreign exchange arises because different nations have different monetary units, and the currency of one country cannot be used for making payments in another country. Because of trade, travel, and other transactions between individuals and business enterprises of different countries, it becomes necessary to convert money into the currency of other countries in order to pay for goods or services in those countries. The transfer of money values from one country to another and the determination of the price at which the currency of one country will be surrendered for that of another constitute the main problems of foreign exchange. Foreign exchange is a commodity, and its price fluctuates in accordance with supply and demand. Exchange rates are published daily in the principal newspapers of the world. By international agreement fixed exchange rates with a narrow margin of fluctuation existed until 1973, when floating rates were adopted that fluctuate as supply and demand dictate.
...ple, monetary authorities were more concerned with convertibility and national interests than they were with economic issues on the domestic level. The gold standard also declined because of the problem of governments needing reserves in order to back up their currencies. Governments were not always able to meet this demand, especially as the world’s supply of gold dwindled over time.
The term Monetary policy refers to the method through which a country’s monetary authority, such as the Federal Reserve or the Bank of England control money supply for the aim of promoting economic stability and growth and is primarily achieved by the targeting of various interest rates. Monetary policy may be either contractionary or expansionary whereby a contractionary policy reduces the money supply, reduces the rate at which money is supplied or sets about an increase in interest rates. Expansionary policies on the other hand increase the supply of money or lower the interest rates. Interest rates may also be referred to as tight if their aim is to reduce inflation; neutral, if their aim is neither inflation reduction nor growth stimulation; or, accommodative, if aimed at stimulating growth. Monetary policies have a great impact on the economic stability of a country and if not well formulated, may lead to economic calamities (Reinhart & Rogoff, 2013). The current monetary policy of the United States Federal Reserve while being accommodative and expansionary so as to stimulate growth after the 2008 recession, will lead to an economic pitfall if maintained in its current state. This paper will examine this current policy, its strengths and weaknesses as well as recommendations that will ensure economic stability.
stability and uphold the value of the dollar. The Fed is able to make the necessary
The massive increase in the Chinese trading relations was fueled by the United States in the year 1979 through the normal trade relations between the two countries. In addition, the Chinese non-concession to the World Trade Organization (WTO) in the year 2001 also facilitated its trading activities with different countries including the United States (Kaplan, 57). However, trading relations with the Chinese have been uneasy resulting from the massive trade imbalances in the recent past, which grows exponentially. The protectionist policies of the United States especially in Washington and Beijing have been putting pressure on the Chinese to revalue their currency as well as protecting it from counterfeits, which may be of adverse effects to the trading relations. This paper gives a comprehensive discussion on the foreign trade relations with china. It further gives an elaborate discussion on the impacts of foreign tr...
In November of 2004, the United States ran a fifty-four billion dollar trade deficit, translating to over 600 billion for the entire year. This deficit is a result of the disparity between the amount of goods that the US imports and the amount it exports. To equalize this deficit in its current account, the American government sells assets from its capital account, often to foreign investors. This phenomenon is seen as a serious threat to the success and continued growth of the nation’s economy, tied in with popular concerns that the United States is losing its competitive and dominant edge in global economics. The traditional economic theory employed to solve this problem calls for a return to mercantile protectionism, through use of tariffs and subsidies to drive up the price of imports and lower the price of exports. Running contrary to this is a second option: increasing domestic savings and lowering government spending. These theories both aim to decrease American dependence upon foreign imports and investment, and ultimately equalize the enormous trade deficit that currently exists.
Money supply is the availability of money in the hands of the public (economy) that can be used to purchase goods, services and securities. In macroeconomics, the price of money is equivalent to the rate of interest. There's an inverse relationship between money supply and interest rates. As money supply increases, interest will decrease. On the other hand, interest will increases as money supply decreases. It is very important to understand that the economy works at market equilibrium. There are several factors affecting money supply; and these contributing factors will be the main focus of this paper. Understanding the basic principle on money supply is imperative to have a good grasp on the macroeconomic impact of money supply on business operations.
Despite of its uselessness, gold is known to be expensive. The reasons are quite simple: because gold is rarely found, gold cannot be created and most importantly is it is shiny and does not oxidize. Gold hence is widely used as jewelry and other representative uses. In addition to that, the overgrowing demand for jewelry and the rareness of gold hence determined its price. In return, gold is assumed as the ideal store of wealth for its high price.
The leading model, Monetary Model links exchange rate movements to the balance of payment, which is used for medium to long term analysis. The following assumptions cons...
Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)
First, in order to function properly, countries have to follow rules to avoid deflation or inflation. However, if a country wanted to, they could easily deflate or inflate their economy by breaking said rules. The second major flaw of the gold standard is that there is not enough gold in the world to serve as money anymore because there is too much money in circulation. The process of mining gold is dangerous, expensive and difficult as it is hard to find. The process of printing dollar bills is quick, easy and cheap. Why go through the effort to mine more gold when the fiat system has arguably done just as well? The choice is clear, the gold standard has been replaced by a new, better standard – the fiat
Today, couple of monetary forms are completely upheld by gold or silver. Subsequent to most world monetary standards are fiat cash, the cash supply could increment quickly for political reasons, bringing about inflation. The