The Economic Dragons Threatening Our World Research Paper

The Economic Dragons Threatening Our World - Research Paper ExampleOffhand our exercise looks easy, but it is not, and this judgment has less to do with the famine of facts than with the basic givens. A rich East Asian nation with a pegged currency fixed to the US dollar for ten years, supported by a monetary policy of tight capital outward flows and unrestricted inflows is experiencing an upward pressure on the exchange rate. The question remains what to do now? deciding on a strategy depends on a clear understanding of the worlds monetary system, the role that exchange rates play, how they be determined, and what go forth happen if we do nothing. As Robert Solomon said (1977, cited in Samuelson, 1992) The worlds monetary system is like the traffic lights in a city, taken for given until it begins to malfunction and to disrupt peoples livesA well-functioning monetary system will facilitate international trade and investment and smooth adaptation to change. A monetary system that functions poorly may not only discourage the development of trade and investment among nations but subject their economies to disruptive shocks when necessary adjustments are prevented or delayed. The worlds monetary system refers to the set of policies, institutions, practices, regulations, and mechanisms that determine the rate at which one currency is exchanged for another (Shapiro, 1996). It is the coordinated personal manner each nation manages its supply of money so that we can buy and sell each others goods, doing business by exchanging pieces of paper, the value of which we confine on called money.