foreign exchange rate determination policy

8/14/2019 FOREIGN EXCHANGE RATE DETERMINATION POLICY

1/15

DETERMINATION POLICYAND

$-Rs EXCHANGE RATE

Prepared By- SHUBHANSH VERMA (02)YOGENDRA PRATAP SINGH (51)SONAM(07)

UTKARSH SINGH (25)

YOGENDRA (49)

In The Guidance Of

Prof.G.R.ARORA


2/15

INTRODUCTION

OPEN ECONOMY

FOREIGN EXCHANGE MARKET

FOREIGN EXCHANGE RATE

1.Bilateral nominal exchange rate

2.Real exchange rate

BALANCE OF PAYMENT


3/15

DETERMINATION OF THE

EXCHANGE RATE

FLEXIBLE EXCHANGE RATE

FIXED (pegged) EXCHANGE

RATE

MANAGED FLOATING


4/15

Gold standard

Aureus minted in 193 by

Septimius Severus

Without gold standard govt. canprint as much as money as they

want ,destroying wealth through

inflation .A German Woman in 1924

feeding a stove with currency

notes ,which burned longer than theamount of firewood they could buy.

Aureus minted in 193 bySeptimius Severus

Exchange rate management :The International experience


5/15

BrettonBretton

WoodsWoodsSystemSystem

John Maynard Keynes (right)

And Harry Dexter White (left) at the

Bretton Woods Conference


6/15

CURRENT SENEARIO A number of economist have referred to the system of currency

relations which evolved after 2001, in which currencies, particularly theChinese renminbi (yuan), remained fixed to the U.S. Dollar as BrettonWoods II. The argument is that a system of pegged currencies is bothstable and desirable, a notion that causes considerable controversy.

-- AT G-20 SUBMIT --

On Sept 26,2008 French President NICOLAS SARKOZY, currentlyalso the President of European Union, said, We must rethink thefinancial system from scratch, as at Bretton Woods.

On oct 13,2008, British Prime MinisterGORDON BROWN said, Wemust have a new Bretton Woods, building a new internationalfinancial architecture for the years ahead.


7/15

PATH OF INDIAN RUPEE1947-2008


8/15

As stated by Subroto roy ex. Consultant

of IMF ( International monetary fund )

Indian rupee had followed the initial

devaluation with Sterling in 1949 and wasmaintained at the same per value for the

next 16 years.

In 1966 the rupee was devaluated by

57.5% to Rs.7.50 per again US dollar.


9/15

But overall during 1960-1970s Indianeconomy continued to suffer egregiousshocks. but still the value of Indian rupeeswas not adjusted downward.

again during 1971 Indian rupee was

devaluated against sterling andmaintained the same rate of Rs. 18.97 assterling up to 1972.

Three small devaluation occurred againststerling by a total of 2 percent between1972-1975.


10/15

In 1975 India delinked from sterling andpegged. With in 2.25 % until jan. 1980.

In 1981-1991svalue of Indian rupee

decreased by 40 % where us dollar also

fall down against major currencies.

In 1991 due to economic reforms whenthe abolishment of import quotas andremoval of export subsidies was done bygovernment rupee devaluated by 9 & 11% respectively.


11/15

In march 1992 the LERMS involving dual

exchange rate was introduced.

On march 1993 the Indian rupee was

begun to be made convertible for purpose

of current account transaction.

The exchange rate of rupee mustnecessarily be seen as an administered

price and not a market determined price.


12/15

$-Rs Exchange

Why Dollar ?

Determination of Exchange Rate.

Cross Exchange Rate.

Types of transaction.


13/15

Present Scenario


14/15

ANY QUERY ?????????


15/15

THANK YOU.

foreign exchange rate determination policy

Documents