Question

In: Economics

How has the current financial crisis in Greece affected exchanges rates (USD-€)? How would this affect...

How has the current financial crisis in Greece affected exchanges rates (USD-€)? How would this affect your US company if you were importing from Greece? Exporting to Greece?

Solutions

Expert Solution

The Greece Financial Crisis was a "Series of Debt ridden Crises that began with the Global Financial Crisis of 2008"..That happened because of "Mis-Management of Greece Economy".

The Membership with the Eurozone was a major economic constraint for Greece. "If the Greece would Not have agreed to the Single Currency, then it could have Devalued their own Currency to Increase Export and inflate its way out of the crisis. The Currency Devaluation would have taken the pressure off the interest rates but Greece could not set its own interest rates because of a member of Eurozone which only have the Authority to determine interest rates which is set by the ECB. Hence, This had affected a lot to the Greece Economy and to it's Exchange Rates.

Greece Financial Crisis obviously had a "Huge and Deep Impact on the Import and Export of Goods and Services". In other words it means, As the Owner of US Company from US, We have to Pay Large Amount of Dollars to Purchase or Import the Goods and Services of the Greece and So, there will be huge loss for me.

On the other hand, if we export US Goods and Services to Greece in their Financial Crisis, Our Profit will not be More as the exchange rate had fallen down.


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