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Published by: Centre for Islamic Banking and Finance
Published in: 1999

Abstract

The economics literature has identified a number of factors relating to an economy''s structural characteristics, its susceptibility to external shocks, and macroeconomic and institutional conditions that influence the relative desirability of alternative exchange rate regimes. This case examines what criteria a country should apply when deciding which exchange rate system is best suited for them. Analysis of the different systems applied provides valuable information as to whether or not the exchange rate will collapse when faced with speculative attacks. This case is suitable for undergraduate and postgraduate courses with an international finance, international banking or international business component. The themes covered also provide an analytical framework in which multi-national company decision making has to be analysed whether from the point of view of international finance, international marketing or international corporate strategy. It is particularly suitable for business situations where foreign exchange hedging and arbitrage decisions are being discussed.

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Abstract

The economics literature has identified a number of factors relating to an economy''s structural characteristics, its susceptibility to external shocks, and macroeconomic and institutional conditions that influence the relative desirability of alternative exchange rate regimes. This case examines what criteria a country should apply when deciding which exchange rate system is best suited for them. Analysis of the different systems applied provides valuable information as to whether or not the exchange rate will collapse when faced with speculative attacks. This case is suitable for undergraduate and postgraduate courses with an international finance, international banking or international business component. The themes covered also provide an analytical framework in which multi-national company decision making has to be analysed whether from the point of view of international finance, international marketing or international corporate strategy. It is particularly suitable for business situations where foreign exchange hedging and arbitrage decisions are being discussed.

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