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Category: Article
Currency board
A currency board is an exchange rate regime based on the full convertibility of a local currency into a reserve one, by a fixed exchange rate and 100 percent coverage of the monetary supply backed up with foreign currency reserves. Therefore, in the currency board system there can be no fiduciary issuing of money. As defined by the IMF, a currency board agreement is “a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specific foreign currency at a f...
A currency board is an exchange rate regime based on the full convertibility of a local currency into a reserve one, by a fixed exchange rate and 100 percent coverage of the monetary supply backed up ...
Free float
A free floating exchange rate, sometimes referred to as clean or pure float, is a flexible exchange rate system solely determined by market forces of demand and supply of foreign and domestic currency, and where government intervention is totally inexistent. Clean floats are a result of laissez-faire or free market economics. Clean float is, theoretically, the best way to go. It allows countries to retain their monetary independence, which basically means they can focus on the internal aspects o...
A free floating exchange rate, sometimes referred to as clean or pure float, is a flexible exchange rate system solely determined by market forces of demand and supply of foreign and domestic currency...
Managed float
A managed or dirty float is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a certain direction. This is generally done in order to act as a buffer against economic shocks and hence soften its effect in the economy. A managed float is halfway between a fixed exchange rate and a flexible one as a country can obtain the benefits of a free floating system but still has the option to...
A managed or dirty float is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a cert...
Flexible exchange rate
Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapidly change due to supply and demand, and are not pegged nor controlled by central banks. The opposite scenario, where central banks intervene in the market with purchases and sales of foreign and domestic currency in order to keep the exchange rate within limits, also known as bands, is called fixed...
Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapi...
Fixed exchange rate
A fixed exchange rate, also referred to as pegged exchanged rate, is an exchange rate regime under which the currency of a country is fixed, either to another country’s currency, a basket of currencies or another measure of value, such as gold. A country’s monetary authority determines the exchange rate and commits itself to buy or sell the domestic currency at that price. To maintain it, the central bank intervenes in the foreign exchange market and changes interest rates. The best known examp...
A fixed exchange rate, also referred to as pegged exchanged rate, is an exchange rate regime under which the currency of a country is fixed, either to another country’s currency, a basket of currencie...
Exchange rate regime
An exchange rate regime is the system that a country’s monetary authority, -generally the central bank-, adopts to establish the exchange rate of its own currency against other currencies. Each country is free to adopt the exchange-rate regime that it considers optimal, and will do so using mostly monetary and sometimes even fiscal policies. The distinction amongst these exchange rates regimes is generally just made between fixed and flexible exchange rate regimes, but we find there are many oth...
An exchange rate regime is the system that a country’s monetary authority, -generally the central bank-, adopts to establish the exchange rate of its own currency against other currencies. Each countr...
Battle of the Bismarck Sea
The Battle of the Bismarck Sea was a battle fought in February 1943 in Southeast Asia during World War II, between the Japanese Navy and the US Air Force. In game theory, its modeling was done by O. G. Haywood, Jr. in his article “Military Decision and Game Theory”, 1954. It’s a game used in game theory to analyze zero-sum games with two players. The game, based on the actual military operation, is based on the decision General Kenney had to make. General Kenney, as Commander of the Allied Force...
The Battle of the Bismarck Sea was a battle fought in February 1943 in Southeast Asia during World War II, between the Japanese Navy and the US Air Force. In game theory, its modeling was done by O. G...
Richard Lipsey
Richard George Lipsey is a Canadian economist born in 1928, who has been Professor at Simon Fraser University for most of his academic career. He has also held professorial posts at the London School of Economics, Essex University and Queen’s University in Kingston, as well as visiting professorships at Yale, the University of California at Berkeley, Manchester, and the University of British Columbia. Richard Lipsey is mostly known for his article, co-authored with Kelvin Lancaster “The General ...
Richard George Lipsey is a Canadian economist born in 1928, who has been Professor at Simon Fraser University for most of his academic career. He has also held professorial posts at the London School ...
Lagrangian
The Lagrange function is used to solve optimization problems in the field of economics. It is named after the Italian-French mathematician and astronomer, Joseph Louis Lagrange. Lagrange's method of multipliers is used to derive the local maxima and minima in a function subject to equality constraints. The existence of constraints in optimization problems affects the optimal value of the function since it implies a reduction of the feasible solutions space. Lagrange's method multiplier is precis...
The Lagrange function is used to solve optimization problems in the field of economics. It is named after the Italian-French mathematician and astronomer, Joseph Louis Lagrange. Lagrange's method of m...
Normative economics
Economic science makes a distinction between normative and positive economics. Positive economics is the branch of economics that focuses in the description and explanation of economic phenomena, while normative is concerned with the application of positive economics with the purpose of giving advice on practical problems including those regarding public policy. We can easily make the distinction between positive and normative economics by asking two very different questions: “What is?” and “Wha...
Economic science makes a distinction between normative and positive economics. Positive economics is the branch of economics that focuses in the description and explanation of economic phenomena, whil...
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