Essay about The Exchange Rate Regime of the UAE

Essay about The Exchange Rate Regime of the UAE

Length: 2738 words (7.8 double-spaced pages)

Rating: Research Papers

Open Document

Essay Preview

The significance of exchange rates within the economy of any society cannot be over emphasized since it is a relevant price concept of any nation. Alterations in exchange rates can lead to massive reallocations of raw materials, resources as well as production between the tradable and non-tradable sectors of the economy of any Country. But seldom is the concept of the exchange rate truly depicted for what it truly is: A relative price, which like any other economic entity is responsive to the laws of supply and demand. When viewed from an approach of a price concept, the exchange rate, according to fundamental economic theories can then be evaluated and determined within an economic system, its behavior as well as its significance can then be understood by outlining and paying relevant attention to certain factors within the economic system that influence it.
In recent times, the IMF has emphasized the need for improved coordination of exchange rate and monetary policies in core areas of macroeconomic management in light of increasing capital mobility. In close relations, the advantages or merits of exchange rate regimes and its alternatives may best be argued in a coherent monetary order framework in terms of the interaction of monetary as well as exchange policies. Exchange rates and the exchange rate regimes are all but distinctive entities in a wider, more versatile set of arrangements termed as the monetary order hence, policies geared towards them should generally and ideally be discussed in this broader, more versatile context.
The adoption of an appropriate or adequate exchange rate regime is most times perceived as a complex and technical process. Several nations around the globe have adopted the floating...

... middle of paper ...
November, 11th 2013.
Latter, T. (1996) The Choice of Exchange Rate Regime. Center for Central Banking Studies,
Bank of England, London.
Jeong, J. & Lee, Y. (2001) International Transmission of Inflation under Alternative
Exchange Rate Regimes: Empirical evidence and its Implications. Global Finance
Journal, 12, p.121-137.
McKinnon, Ronald. (1990). The Exchange Rate and the Trade Balance: Insular versus Open
Economies; Open Economies Review, Vol. 1, No.1.
Mabry and Ulbrich, (1994) Economics. 2nd edition. USA, Houghton Mifflin Company.
Morris, G. (2003) Too Sensational: On the Choice of Exchange Rate Regimes. Economic
Journal, 113(491), p.663.
Mishkin, F.S. (1996) Understanding Financial Crises: A Developing Country Perspective.
NBER Working Paper, 5600, p.1-21.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Understanding International Macroeconomy And The Exchange Rate Arrangements Of Gcc Countries

- Understanding International Macroeconomy Final exam 1. What are the implications of the recent fall in oil prices for the exchange rate arrangements of GCC countries. The GCC region has a fixed exchange rate regime against the dollar, effectively what this means is that they have handed over their monetary policies to the US. There are several reasons why they have chosen to do so: First, for smaller economies being tied to a larger one essentially means is that their economy reacts as the country they are tied to (so if they are doing well then so does the smaller economy) therefore in times like these, this is helpful because of the strength of the US economy and the affect it has on...   [tags: Currency, United States dollar, Monetary policy]

Research Papers
1480 words (4.2 pages)

Questions On Exchange Rate Fluctuations Essay

- (c) A consideration of the key risk factors that are relevant to the decision whether to undertake the investment, with suggestions on how these risks might be managed. 1. Exchange rate fluctuation risk Exchange rate fluctuations come in three forms, which is economic exposure, transaction exposure and translation exposure. Exchange rate movements will lead the cash flows become more volatility. First, “Economic exposure – This is lesser known than the previous two, but is a significant risk nevertheless....   [tags: Management, Risk, Exchange rate]

Research Papers
1742 words (5 pages)

Foreign Currency Exchange Rate That Impact The Profitability Of The Company

- Small businesses such as Alliance Design Concepts are great examples that shows a fluctuation in the foreign currency exchange rate that can impact the profitability of the company. Small businesses have to understand the risk when they doing business on an international level. Very often the exchange rate value will not work in their favor. In case with Alliance, since they were using an international supplier, they needed to make sure they have converted all the cost of equipment from USD to CAD....   [tags: Foreign exchange market, Exchange rate, Currency]

Research Papers
792 words (2.3 pages)

China 's Exchange Rate Reform Essay

- There are several events regarding China’s exchange rate reform. Arguably, the first step happened in 1994. Before 1994, RMB exchange rate was overvalued, marking at 1.5 Chinese yuan/ US dollar in 1978. Then, the Chinese government implemented several measures to directly depreciate the currency and introduced dual-track exchange rate, ensuring that RMB exchange rate could reflect market mechanism and approach equilibrium exchange rate. Later on January 1, 1994, PBoC declared the unification of official and market RMB exchange rate....   [tags: Foreign exchange market, United States dollar]

Research Papers
741 words (2.1 pages)

Essay about Relationship Between Exchange Rate Volatility And Trade

- 2.3 Armington model and its results In this sub-section, we present a brief overview of the Armington model that has been used by other researchers to find the relationship between exchange rate volatility and trade. In some trade models, such as neo-classical trade models, we assume that goods are homogeneous even though they are produced in different countries. Indeed, the prices of goods produced in different countries do not move in the same direction. However, it was first pointed out by Armington (1969) that goods that are produced in different countries need to be treated differently....   [tags: International trade, Foreign exchange market]

Research Papers
704 words (2 pages)

Questions On The Foreign Exchange Market Essay

- INTRODUCTION One of the fundamental topics in the foreign exchange market is to know how information is reflected in the determination of prices. This question is also true for any topics in financial economics but it is all the more important in the currencies market, which is the largest market in the world. The first searches about the correlation between the releases of macroeconomic data and the foreign exchange rate between two currencies were made in the early 1980s. Meese and Rogoff (1983) first try to demonstrate that exchange rates could not be explained by fundamentals....   [tags: Foreign exchange market, Exchange rate]

Research Papers
1307 words (3.7 pages)

Notes On Foreign Exchange Market Essay

- Trevir Nath Top Forex Risks The foreign exchange market, forex for short, is the buying and selling of currencies around the world. Like stocks, the end goal of forex trading is to yield a net profit by buying low and selling high. Favorable for forex traders, they have the advantage of choosing a handful of currencies rather than parsing through thousands of companies and sectors. In terms of trading volume, forex trading are the largest markets in the world. Due to its high trading volume, forex assets are classified as highly liquid assets....   [tags: Foreign exchange market, Exchange rate]

Research Papers
716 words (2 pages)

Essay on Foreign Currency : Foreign Exchange Market

- Forex simply means buying and selling of foreign currency in ‘Foreign Exchange Market’. People call it ‘Foreign exchange currency market’ or ‘foreign currency market’ or ‘FX market’. It is the largest and most liquid financial market in the world with an average turnover of near about U.S. $4 trillion on daily basis. In order to conduct foreign trade or business, currencies needs to be exchanged. Example: You are based in India and want to buy chocolates from Switzerland, you will pay the cost of chocolates in Swiss franc since you are importing....   [tags: Foreign exchange market, Exchange rate]

Research Papers
857 words (2.4 pages)

Essay on Foreign Exchange Markets And Foreign Markets

- Foreign Exchange Markets The foreign exchange market is fundamentally a market in which various national currencies are bought and sold. There are as many currencies as many foreign nations. In any international transaction, it involves conversion of one currency into another. Foreign exchange markets is the mechanism for the arrangement of converting one currency into another. When we buy commodities from foreign countries, we have to convert our currency into foreign currency to make payment....   [tags: Foreign exchange market, Exchange rate]

Research Papers
873 words (2.5 pages)

Top Forex Risks : Foreign Exchange Market Essay

- Top Forex Risks The foreign exchange market, forex for short, is the buying and selling of currencies around the world. Like stocks, the end goal of forex trading is to buy low and sell high. However forex traders have the advantage of choosing a handful of currencies rather than discerning through thousands of companies and sectors. In terms of trading volume, forex trading is the largest markets. Due to its high trading volume, forex assets are classified as highly liquid. The majority foreign exchange trades consist of spot transactions, forwards, foreign exchange swaps, currency swaps and options....   [tags: Foreign exchange market, Exchange rate]

Research Papers
702 words (2 pages)