Question

What is the degree of cooperation that is required to contrust and maintain a global system of stabilized exchange rates or another process that restrticts exchange rate flucuations. What are the moral implications of this approach to international economic relations?

Answer 1

The World Economic Development are measured by important parameteric economic indicators such as GDP, Interest Rates, Per Capita Inome and Inflation rates. Among those all parameters Currency Exchange rate is also considered one among the main significant factor which influences the Economic development. But at the same time, there arouse a question of Stabilization of Currency Rate. It is general known fact that the exchange rate has the unique feature of fluctuation in every economic cycle. The Government and the Govt-aided Economic associations has the responsibility of monitoring the level of exchange rate.

The Exchange rate have the coupled effect of Inflation. The inflation have indirect proporational link with the changing effect of Inflation. Let us analyze the following determinants which explains the degree of cooperation which are needed to maintain a global system of stabilized exchange rates by restricting exchange rate fluctuations briefly. The Government spending on National Building Activities should be in a average level. The Government spending is nothing but the Public Debt. The mass level of Deficit level of Financing lead to pay for such National Building Activities. In order to pay for it Government should print more money. This will lead to money supply and thus lead to high inflation. It will pose a negative impact on Foreign Investors. The High inflation leads to lower value of the country. For example US Dollar value will be more cheaper than ever if the Deficit Financing crossed the equilibrium level of spending. In this case the the Federal Bank has the responsibility of comparing the value of all Currency Exchange values of the countries in which It have the Trade relations by means of Export. If any indicator marks the risk sign of depreciation of the value of the currency, the Country can control the inflation by stabilizing the Public Debt. This will makes the Federal Government restricts to do the Deficit Financing in the Large-Scale. So Henceforth the above point is considered as the degree of comparison to restrict the process of too much fluctuations in exchange rate.  

The Moral implications can be achieved only when Monetary Cooperations are worked out between the Developing nor Developed Countries. The Monetary Cooperations refers to the linking of Monetary policies of two different nor neighboring countries in order to ensure Exchange Stability. It also removes the Trade barriers. Economic Institutions like International Monetary Fund (IMF) and European Monetary Cooperation Fund (EMCF) provides various guidelines and creates various platforms to reinforce the advantages of Monetary Cooperations among all the countries. The Moral implications behind the Monetary Cooperations approach are described briefly as follows. The Monetary Cooperations between the countries will ensures the stable and balanced economic growth. Then automatically the mutual benefits of stable exchange value can be achieved. European and Asian Countries and Eurpean and US countries has implied the approach of Monetary cooperations. This approach is finely considered as the moral implication of strong Economic power spreading the Stable Equilibrium of all Countries Currency Exchange rate at International Level. Many Bi-lateral Agreements are made between the Countries with the goal of attaining accute Stability in the Exchange rates without any fluctuations amidst the unfavorable economic conditions of Recession and Hyper-Inflation.