Largest depreciation of the currency, from 5.3 pesos per dollar to over 10 pesos per…
3. The value of a country’s currency is likely to decline as a result of…
In a fixed exchange rate system, how do countries address the problem of currency market pressures that threaten to lower or raise the value of their currency (a & b only: if demand rises, countries must fill the excess demand for foreign currency by selling their reserves, if demand falls, then countries must increase demand by buying up the excess supply with domestic currency)…
The government could use its reserves of other foreign currencies to buy their currency- directly boosting demand for the currency…
Positioning the United States as its key trading partner was accomplished via dollarization. Accepting the US dollar as its sole form of currency eased trade complications between El Salvador and the US and eliminated volatility of the Colón in the foreign exchange market. This dollarization gave Salvadoran industry the credibility of the US dollar, eliminating or limiting national inflationary effects upon trade. This dollarization, however, lessens the Salvadorans control on their economy through fiscal policy, but also serves to prohibit political instability’s effect on the currency.…
Because of NAFTA and excellent trading relations with the U.S., Mexico's Gross Domestic Product has risen 5.5 percent per year for the last five years. When Mexico experienced the peso crisis, it rebounded quickly, from an $18.5 billion deficit in 1994 to a $7.1 billion surplus in 1995. The unemployment rate is down in Mexico as well as in the U.S. Mexico's urban unemployment rate is less than four percent, after having risen from six percent in 1992 to 8.5 percent in 1995. Manufacturing, construction, transportation, and communications through NAFTA connections have been leading Mexico through its tremendous success. Mexico's exports however, are the greatest factor in this booming period. In fact, it is estimated that the year 2001's real exports will be more than three times as large as when the NAFTA was signed (Orme 53). When Mexico is successful, jobs are created, and the economy is stable, there is much less of a desire for Mexicans to come illegally to the U.S. There are many opportunities in Mexico since NAFTA has influenced the market and that certainly cuts down illegal immigration. Mexico's prosperity should be a concern of all Americans. It makes for better investments and opportunities within Mexico for its…
Whilst popular opinion centres on the assumption that rising exchange rate has mostly positive effects on the economy, the impacts are both diverse and extensive. In the short run, a major implication is the improvement in the terms of trade as exports become more expensive and imports become relatively cheaper. This rise in the terms of trade leads a larger amount of imports to be purchased with a given amount of exports; an increase in the purchasing power of domestic production As a result of relative price fluctuations, there is likely to be an increase in domestic spending on imports, and decreased demand for exports in foreign countries.…
“When the U.S. dollar was introduced on April 2, 1792, it was based on the peso with the exchange rate of 1 dollar to 1 peso” (“What is the Mexican peso?, n.d.). Since that time the exchange rate of Mexican peso to United States dollar has changed considerably. Due to supply and demand of products produced by either country the exchange will rise and fall. Consequently products produced by either country result in a higher or lower demand for that product resulting in the amount that the currency is worth in that country when exchanged for another countries currency. For example, if Mexico produced a product that was in high demand in the United States the Mexican Peso’s exchange rate would rise and the United States dollar would fall because it would take more dollars to equal 1…
The first reason why Mexico should adopt a silver standard as national currency is because Mexico is the biggest producer of silver in the world. This metal has been extracted since the colonial times during which Spaniards considered silver more valuable than gold. Although a great amount of silver has already been mined, there is much left. For this same reason, Mexico would also see its silver currency as a product to sell.…
They believe that for the most part, excluding very large supply shocks, business declines are more of a monetary phenomenon. However, the term is still widely used. Mexico 's economy has achieved broad stability and enhanced resilience in recent years, and the country has enjoyed steady growth. Although linked strongly to the currently weak US economy, several factors including the modest external current account deficit, helped by the high oil export prices, FDIs, low external debt ratios, comfortably positioned FE reserves, well supervised financial regulations and well capitalized, liquid and profitable banks have contributed towards strengthening Mexico’s position.…
1. Take a look at Mexico’s balance of payments over the past few years. Use the schedule I have attached to the case – it is in the same format as we used to examine the U.S. balance of payments. What do the trade and current account balances suggest about the likelihood of a potential devaluation of the peso? Why?…
The currency dropped more than 12% against the US dollar, as investors began to wonder what would eventually happen to Mexico’s exports (i.e. cars, oil, etc.) during what is evidently a politically unstable climate, as most of them end up in the US through one means or another.…
There are many different problems that Mexico faces today. All the drug-related murders or the kidnapping for ransom are issues that they are working on that have been going on for a very long time now. The people how are being killed are not only drug dealers but innocent bystanders. Another big problem is Mexico 's oil production is declining. It is the because of the lack of oil discoveries and the aging of the current oil fields.…
With less foreign borrowings, dollar inflows are tempered and the peso is kept from significant appreciation.…
Balance of payment will go into deficit → Shortfall (deficit) of foreign currencies. Gov will have to borrow money from abroad, or drawn its foreign currency reserves to make up the shortfall. Pb because: if it goes on too…