1 A EXCHANGE RATE POLICY, HISTORICAL EVOLUTION OF EXCHANGE RATE SYSTEM, DERIVATIVE INSTRUMENTS IN FOREX MARKET, FOREIGN EXCHANGE RESERVES MANAGEMENT, AUTHORISED PERSONS UNDER FEMA
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One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the primary objective of India's exchange rate policy as managed by the Reserve Bank of India?
India's exchange rate policy aims to maintain orderly market conditions, reduce excess volatility, and prevent destabilising speculative activity, while allowing the rupee's value to be broadly determined by market forces.
What is the Gold Standard system in the context of international exchange rates?
System where currencies are pegged to fixed weight of gold.
Under which exchange rate system did countries peg their currencies to gold at a fixed price, making exchange rates between currencies stable?
Under the Gold Standard system, each currency was pegged to a fixed quantity of gold, which automatically fixed exchange rates between participating countries and ensured balance-of-payments adjustment.
What is the Plaza Accord of 1985 and what was its main objective?
G5 agreement to depreciate US dollar against yen and deutschmark.
What was the Bretton Woods system and when was it established?
The Bretton Woods system was an international monetary framework established in 1944 that pegged member currencies to the US dollar, which in turn was convertible to gold at USD 35 per ounce.
What is an Exchange Rate Mechanism (ERM) as used by European countries?
System linking European currencies within agreed fluctuation bands.
In what year did the Bretton Woods fixed exchange rate system effectively collapse, and what was the trigger?
The Bretton Woods system effectively collapsed in 1971 when the United States suspended gold convertibility of the dollar under President Nixon, ending the gold-dollar peg.
What is the concept of Purchasing Power Parity (PPP) in forex economics?
Theory that exchange rates adjust to equalize price levels between countries.
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