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Beginning of Paper
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Chaos in The Currency Markets : Currency Crisis of The EMS
1. What does the crisis of September 1992 tell you about the relative abilities
of currency markets and national governments to influence exchange rates?
The currency markets and national governments both have abilities to
influence exchange rates. Like other financial ....
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Middle of Paper
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.... rate, which reduces the supply of fund in the other countries and
places upward pressure on their interest rates. The flow of fund would continue
until the interest rate differential has been eliminated or reduced. This
process would not necessarily apply to countries outside ERM that do not in the
fixed exchange rate system, because the exchange rate risk may discourage the
flow of funds to the countries with relatively high interest rate. However,
since the ERM requires central banks to maintain the exchange rates between
currencies ....
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SUBJECTS
