Foreign exchange reserves

The Federal Reserve has the dual job of ensuring price stability and maximum employment, which are contradictory objectives. The Feds try to achieve the goals through monetary policy which determines the demand and supply of money by controlling interest rates. The Fed’s goal is to achieve a natural rate of unemployment of more or less 5%. When the actual unemployment figures are below the natural rate of unemployment, inflation increases and there is a high demand of goods and services propelling

The business cycle model is a diagram that shows how economic activity fluctuates over time. There are four phases of this activity known as boom, recession, upswing and downswing. Overtime, the theory is that economic activity will increase and that living standards, employment and the quality of life to rise. The boom or peak stage of the business cycle is when the level of economy is at its highest. It occurs after the upswing stage. The levels of expenditure, output income and employment are

risks of holding Sovereign currencies as reserve currencies Mina Jiang (mj86), the University of Akron Research Summary This research is devote to study different risks of one country holding sovereign currencies such as dollar, euro and yen as its reserve currencies. In general, there may have three kinds of risks, which include inflation risk, the exchange risk and the seignorage risk. It also tries to explain the effects of these risks on the reserve country from the perspective of currency

new credit and foreign exchange reserves had been depleted to a point where India could barely finance three weeks’ worth of imports which made the Indian government airlift the nations gold reserves as a pledge to the International Monetary Fund (IMF) in exchange for a loan to cover its balance of payment debts. The main causes of the crisis was 1) currency overvaluation,2) the current account deficit, and the confidence of investors played a significant role in the sharp exchange rate depreciation/devaluation

2005, it linked its currency to other currencies rather than dollars and let its currency appreciate by 2.1%. The central bank of China did this by buying and selling the dollar dominated assets in exchange of printed Yuan in order to eliminate excess supply or demand for the Yuan. Due to this, the exchange rate between the dollar and the Yuan, basically, remained constant irrespective of changes in economic factors which could have otherwise destabilized the Yuan relative to the dollar. Since these

adopt this monetary strategy to deal with these series of problems, and keeping the healthy and steady growth in economic markets. On the other hand, China wanted to increase the monetary (Yuan) liquidity, further, wanted Yuan to become international reserve-currency. Broadly speaking, China hoped to consolidate its central position in the global economic markets. In conclusion, pulling the healthy and steady growth internally and pushing Chinese monetary (Yuan) circulate in the international economic

unemployment, increasing inflation, current account deficits, negative growth, and zero interest rates along with it, depreciating the value of money. In the midst of all this the future of the U.S. dollar is uncertain. Will the dollar maintain its reserve currency status even after its depreciation and regain faith of the nations? Or will it be replaced by some other currency, shifting the power balances among the nations forever? The U.S. dollar peaked in value in 2000-2001 and has been in a significant

been positive, largely on account of increased foreign direct investment and deposits from non-resident Indians; until this time, the overall balance was only occasionally positive on account of external assistance and commercial borrowings. As a result, India's foreign currency reserves stood at $285 billion in 2008, which could be used in infrastructural development of the country if used effectively. In September 2017 India's foreign exchange reserves crossed $400 billion India's reliance on external

the U.S., European countries, China, Switzerland, and Japan, each using different ways in devaluing the domestic currency: the US printed a lot of money via quantitative easing (QE) ; China controlled capital inflows through accumulating foreign currency reserve and undervaluing renminbi; Switzerland prohibited the franc to appreciate further against the euro; and Japan announced the unlimited purchasing of government bonds-which increases money supply-to counter economic downturn. Opponents contended

deficient, the structure of foreign change reserve is very risky, because China has huge foreign exchange reserve of US dollar, which makes China also suffer from the financial crisis. Financial crisis is caused by the American subprime mortgage, to combat the financial crisis, the United States issued a substantial amount of U.S. dollars, which makes the U.S. dollar depreciate continuously, and this action makes many countries that have great amount of foreign exchange reserves in U.S. dollars suffer