Purpose Of Issuing Currency Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2339 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? In 1907, the Currency Board was established for the purpose of issuing currency and protecting its value. The World Banking Mission which examined economic situation and potential development of a country. It had recommended composing a Centre Bank and eventually the Central Bank of Malaya Ordinance was established in 1959. Don’t waste time! Our writers will create an original "Purpose Of Issuing Currency Finance Essay" essay for you Create order However, the currency issuing authority was transferred to Bank Negara Malaysia after 1967 (Institut Bank Malaysia, n.d. ). According to Intitute Bank Malaysia (n.d.), under the Financial Sector Master Plan (FSMP), the financial industry is now undergoing consolidation phase. Commercial banks are merging with their finance companies. This is to increase competitiveness of the financial institutions by providing one-stop financial services. Malaysia has three derivatives exchanges which commodities, fixed income and equity products. Besides, Malaysia is the one who introduce KLCI futures earlier than India, Taiwan and Korea. The first Malaysian derivative exchange was established at 1980 which is KLCE. The initial derivative product was the Crude Palm Oil (CPO) contract. The CPO futures contract was the only product in its category and remained as the main product (Bacha, 2004). Bacha (2004) found in 1995, Malaysia introduced financial derivatives together with introduction o f Kuala Lumpur Options and Financial Futures Exchange (KLOFFE) (which currently known as KLSE CI Stock Index Futures contracts). After two years, the Malaysian Monetary Exchange (MME) was launched and traded the 3 month KLIBOR contract. The three exchanges, KLCE. KLOFFE and MME have now been consolidated into a single exchange, the Malaysian Derivatives Exchange (MDEX). Thus, nowadays we can trade commodity, equity and interest rate derivatives on MDEX (Bacha, 2004). The relationship between the percentage changes in the spot exchange rate over time and differential between comparable interest rates in different national capital markets known as the International Fisher Effect (IFE). International Fisher Effect (IFE) attributes changes in exchange rate to interest rate differentials, rather than inflation rate differentials among countries. The International Fisher Effect, (IFE) or fisher-open, states that spot exchange rate should change in an amount equal to but in the opposite direction of the difference in interest rates between countries. International Fisher Effect (IFE) to estimate the equilibrium future spot exchange rate S*ÂÂ ¥/$ assuming International Fisher Effect (IFE) holds. Justification for the International Fisher Effect (IFE) is that investors must be rewarded or penalized to offset the expected change in exchange rates. The International Fisher Effect (IFE) predicts that with unrestricted capital flows, an investor should be indifferent between investing in dollar or yen bonds, since investors worldwide would see the same opportunity and compete it away (Moffett, 2012; Madura, 2012). The International Fisher Effect (IFE) is unpredictable due to the different short-term factors that influence the exchange rates and the predictions of nominal rates and inflation. However, the long-term International Fisher Effect (IFE) just provides a little better result. Interest rate differentials always offset by exchange rates, but error alwa ys occur when forecast the future spot rate (Shalishali, 2012). Shalishali (2012) stated that exchange rate fluctuation and interest rate difference are affecting consumers and the worldwide economy. Among others, exchange rates fluctuations can cause inefficiency and misrepresent world prices and further capture investors attention to countries inflation. In addition, the long term investment return and international trade are affected by long-term movements in exchange rates. By knowing some short-term foreign exchange movements, international businesses that deal with foreign exchange transactions on daily basis could benefit. Exchange rate movement will create higher risk. Hence, companies may utilize information available to determine how many derivative securities such as options, forwards, and futures to hedge in order to minimize risk arising from exchange rate movements. Moreover, the actual return of investors portfolio with overseas holding will directly affected by ex change rates. The world has experienced at least two financial crises that have strong contagious effects within the decade of 1997/98 and 2007/08. The Asian Financial Crisis 1997/98 began in July 1997 with the devaluation of the Thailand currency. The key financial institutions in South Korea and Japan shut down due to the worries of global fund withdrawal and at last lead to a collapse of financial market and currency depreciation in regional. In those East Asian countries, there was a dramatically increase in interest rate in 1997 since their currencies collapsed. For instance, short-term rates in South Korea rose from 12 to 30 percent within a month (Li Wong, 2011; Cho Kenneth, 2003). Figure 1 (refer to appendix) reports data characterizing the situation in some Asian countries during the 1997/98 Asian crisis. The Asian crisis is the best characterized as triggered by a mixture confidence crisis in a few countries, which then spread- through trade and depending on the co untry, also financial channels to other countries within and outside the region. It shows that, as a result of the crisis, exchange rate depreciate over the second half of 1997. Increase in interest rate move exchange rate in opposite direction. However, Malaysia was an exception. Even with capital control, the exchange rate still depreciating until it re-pegged Ringgit Malaysia against the US dollar (Sanchez, 2005). Literature Review In IMF point of view, the relationship between interest rate (also known as monetary policy) and the exchange rate is that a rise in interest rate will stabilize the exchange rate. This relationship has been frequently discussed by the World Bank, IMF and US Treasury especially during economy crisis since it is important for policy implications. Hnatkovska, Lahiri, and Vegh (2012) conducted a study and the research studies have established the relationship between the exchange rate and short term interest rates is non-monotonic. This study expressed when there is a smaller increase in the nominal interest rate, the currency will be appreciated. On the contrary, larger raise in nominal interest rate lead to the currency depreciated. Besides, some research studies stated that the nominal exchange rate has negative relationship with the nominal interest rate differential and has a positive relationship with expected long run inflation differential (Shah Rehman, n.d.). A short term interest rate is the premium policy instrument that policymakers applied in order to change currency values. There are three effects that will influence the exchange rate by increasing short term interest rate. First, the money demand effect which indicated higher interest rates will increase the demand for domestic-currency denominated assets hence appreciate the currency. On the other hand, higher domestic interest rates reduce domestic output through a credit channel and this effect will depreciate the currency which defined as output effect. In addition, fiscal effect emphasized on a rising in interest rates tends to increase the debt service burden of the fiscal authority and consequently it increases inflationary expectations and weakens the currency. Besides, physical capital can cause both appreciations and depreciations on the effect of temporary increases in interest rates (Hnatkovska et al., 2012). Other factors of no co-integration between real effective exchange rate a nd interest rate differential such as permanent fluctuation in exchange rates as a result of high inflation rate and interest rates, instable monetary policies, unemployment, poor GDP growth rate, poor administrative system, political instability and improper policies (Shah Rehman, n.d.). Shah and Rehmen (n.d) did a research on the relationship between real exchange rate and real interest rate differential on developing country. In this study, they unable found any evidence to shows the relationship between the variables. Theoretically, the relationship between real exchange rate and real interest rate should hold better in long term than in short term. MacDonald and Nagayasu (2000) have conduct a study on 14 developed countries on the similar topic, the empirical result using the single equation method of Johenson shown the existence of long run relationship, the relationship is even clearer when long term interest rate is used. According to the study of (Li Wong, 2011), on e inspiring finding is that the inter-temporal relationship between real interest rate differential and real exchange rates in Iceland, Singapore, Thailand and India is extremely low. The change in their monetary policy did not generate a significant impact on their capital movement. It suggested the interest rate of other countries has efficiently been adjusted, thus there will not be any impact on real exchange rate. Furthermore, many researchers are interested in conducting studies on countries which involved in economic crisis. Researchers had extended the study to Asian countries that other researchers never been done the research using the period Asian economic crisis. He found the relationships pattern different between pre and post economic crisis, where it changes from positive relationship to negative relationship especially for Indonesia. (Bautista, 2006) Economic crisis has strongly aroused the researchers interest to conduct study on Korea as well. Dekle, Hsiao, and Wang (2001) proved that the empirical result are supportive the traditional view. Monetary tightening and the rise in interest rate successfully appreciating Korea won. In fact, it is consistent with the expectation of IMF as they request Korea to raise their short term interest rate after a sustained period of stability depreciated precipitously. An extended study of Meese and Rogoff (1998) with the purpose to find a stable long run relationship between real exchange rate and real interest rate differentials using Korean Won exchange for US Dollar data for period 1991 to 2011, real interest rate did not affect the real exchange rate significantly before crisis (as cited in Park, n.d.). After the crisis, real interest rate differential had a positive significant effect and Korean foreign exchange reserve a negative significant effect on the real interest rate respectively. They also mentioned that the data fitted the interest rate parity theory better after crisis than before crisis , this is reasonable given openness and integration into global market of Korean financial market. The study on ability of interest rate as a defend tool during economic crisis also is a topic concerned by IMF and World Bank (Caporale, Andrea Cipollini, Panicos, 2005). They investigate the monetary tightening policy in defending the exchange rate from speculative pressure during the Asian financial crisis from 1991 to 2001 on Indonesia, South Korea, Philippines, and Thailand. They found that during the crisis period, there was a simultaneously increase in domestic interest rate in respond to exchange rate depreciation. The effects of an increase in the domestic interest rate on domestic currency, owning a higher probability of bankruptcy of highly leverage Corporation. However, during tranquil periods the nominal exchange rate appears to appreciate sharply in response to rise in the domestic interest rate. A similar study been carry out by (Chen, 2007), while the main study is f ocus on interest rate and exchange rate volatility, the empirical result presented supportive view of high interest rate would no help to defend the exchange rate. He suggested that any structural model proposed in this paper suitable to predict the relationship between real interest rate and exchange rate volatility due to all model are consistent with empirical regularity and provide one of cause and effect. Some researchers are interested to identify the pattern of relationship of fixed exchange rate and interest rate during economy crisis. G. Benigno, P. Benigno, and Ghironi (2007) revealed the relation between interest rate rules, exchange rate regimes, and determinacy of the rational expectation equilibrium of the economy. In this paper, follower country is in the exchange rate regime, it means the country that trying to peg the exchange rate, while foreign is the leader. As discussed inÂÂ  Obstfeld and Rogoff (1996), although a fixed exchange rate implies equality bet ween the domestic and foreign interest rates, pegging the domestic interest rate to the foreign one is not sufficient to fix the exchange rate in all periods (as cited in G. Benigno, P. Benigno, and Ghironi, 2007). It results in instability and indeterminacy. This paper proposed a solution to this problem in terms of interest rate feedback rules for the follower countries so that can ensure the determinacy of the fixed exchange rate equilibrium in a rational expectations setting under relatively weak conditions. The class of rules proposed by this paper is differs from other approaches in the literature (such asÂÂ  Taylor, 1994;ÂÂ  Wieland, 1996) because it does not require the specification of any point in the money supply path (as cited in G. Benigno, P. Benigno, and Ghironi, 2007). Recommendations Based on the research studies, we found that the relationship between interest rates is well explained through the International Fisher Effect, however the previous study more focus on the Purchasing Power Parity (PPP). According to Alan and Mark (2004), PPP is a disarmingly simple theory that hold the nominal exchange rate between two currencies should be equal to the ratio of aggregate price levels between the two countries, therefore a unit of currency of one country will have the same purchasing power in a foreign country. We suggest that either each of the theory should not be ignored because both also will influence the exchange rate effectively. Furthermore, previous researches more focus on their studies using the economy crisis background. So we suggest that they can do some researches on the relationship between interest rate and exchange rates under stable economy conditions. Will the results have the differences if compare to the crisis economy? In addition, we also identified that most researchers only emphasize on the inflation that will depreciate the exchange rate. We recommend that they can also take the deflation into the considerations. Actually deflation can be considered as a natural phenomenon, as far as hard currency economies are concerned. Besides that, deflation can leads to the escalation in the purchasing power parity of each unit of currency. Conclusion In conclusion, excluding factors like inflation and interest rate, the most important determinant of a countrys relative level of economic health is exchange rate. It plays an important role in a countrys trade level which is vital to most every free market economy in the world. Many research studies showed that there are negative relationship between interest rates and exchange rates. Interest rates, inflation and exchange rate are highly interrelated. The exchange rate of the currency holds the bulk of investments determine that portfolios real return. Actually the exchanges rates are established by frequent difficult reasons that often leave even the most experienced economists confused, financiers should still have some understanding of how the currency values and exchange rates play a main role in their investment.

Different Types Of Street Gangs - 1868 Words

STREET GANGS Abstract This paper explores three different types of street gangs. These gangs are the Black Disciples, the Mongols, and the Bloods and the Crips. The paper talks about the activities that these gangs are involved in, and also covers at least three different topics for each gang. This paper also examines the information that people should know about these certain types of gangs. The paper covers background information of each of these gangs, criminal activities they are involved in, and the rise of them since the gang was created. By reading this paper you will learn of how many people are actually in each of these gangs and also where they can be found or located at around the world. All of the gangs explored in this paper are very dangerous, well organized, and sophisticated which makes them a bigger threat to society. Therefore by reading this paper you will be informed about these gangs and maybe can find a way to stop the violent crimes they commit because gang activity is on the rise a nd will be for a long time. STREET GANGS Street gangs The citizens of America should be informed of the information of the most dangerous gangs in the world, they may be even closer to you then you think. Many of these gangs are very well organized and sophisticated which makes them a huge threat to our society, and people should be more informed about these gangs so they can try to stop their violent activities. In America there is about 33,000 streetShow MoreRelatedThe End Of The American Revolutionary War1595 Words   |  7 PagesThe new immigrants settled in the Northeast region of the United States and as a result, it began to experience street gangs. However, most organized and violent street gangs did not emerge in America until the beginning of the nineteenth century. As immigration continued street gangs emerged in the United States in four regions during different periods of time. These first gangs were mainly comprised of white immigrants from Northern and Western Europe who came to the United States from theRead MoreThe End Of The American Revolutionary War1595 Words   |  7 PagesThe new immigrants settled in the Northeast region of the United States and as a result, it began to experience street gangs. However, most organized and violent street gangs did not emerge in America until the beginning of the nineteenth century. As immigration continued street gangs emerged in the United States in four regions during different periods of time. These first gangs were mainly comprised of white immigrants from Northern and Western Europe who came to the United States from theRead MoreAnalysis Of The Documentary Crips And Bloods 1241 Words   |  5 Pagesdocumentary Crips and Bloods: Made in America (2008) focuses on conditions and causes of gang violence in Los Angeles, California, as well as the history and background of the main gangs that reside there. The information in the film is compiled from interviews of past and present members of the Crips and Bloods, which are the two main gangs that contribute to the violence in the area. The interviewees explain how the gangs work and the conditions under which these people live daily. There can be parallelsRead MorePrison Gangs : The United States991 Words   |  4 PagesThe fact that prison gangs are not visible to the public makes them seem unknown to t he public eye, however the pose the same threats to the United States as all other gangs. Prison gangs are also often written off and forgotten about by authorities due to fact that they are incarcerated. â€Å"Due to their seclusion from the public and their minimal visibility, prison gangs are difficult to target and are thus frequently overlooked as threat actors, which enables them to commit various crimes withoutRead MoreShould Street Gangs Be Considered Terrorist Organizations?1711 Words   |  7 PagesShould Street Gangs be Considered Terrorist Organizations? Terror, violence, and death are the common denominators in our society nowadays. Why? Because of street gang fights. Innocent people have been killed as a result of street gangs. These groups of criminals use violence against societies and band together for mutual protection and profit. Street gangs are gangsters controlling, attacking, and killing people on the streets, as a result, they are one of the biggest social problems around theRead MoreThe Negative Impact of Gangs on Oklahoma1247 Words   |  5 Pages The large negative impact on Oklahoma that gangs have caused resulted in a change in our state. In all fifty of the United States, more types and groups of gangs are committing more crimes and illegal activity. Gangs have significantly impacted Oklahoma by increasing violence, homicides, and drug trafficking, and something must be done. The amount of people affiliated with gangs is rapidly increasing. Oklahoma authorities say that gangs are an urban problem. In a report in the year 2010, studiesRead MoreEssay On Juvenile Gangs973 Words   |  4 Pages The History Of Juvenile Gangs Jerry L. Page East Carolina University Introduction The History Of Juvenile Gangs Gang Types Over the course of history, there have been many gangs that have come to light. There are three different types of gangs that have been around for many years. These gangs are politicized gangs, neo-Nazism gangs, and street gangs. Politicized gangs promote political change by making other citizens scared of them. Street gangs are commonly known to cause violenceRead MoreThe Problem Of Violence And Violence1702 Words   |  7 Pagesthe UK’s Government has reviewed the existence of gangs and the extent of violence caused by these gangs. An intensive prevention strategy has been put into place and has been running for a small number of years. Failing to evaluate the effectiveness of the project; the Home Office have spent over  £10 million on their ‘Ending Gang and Youth Violence’ programme (House of Commons, 2017). It is paramount that a unified definition of the term ‘gangs’ is understood by the Home Office and Police forcesRead MoreThe Impact o f Gang Violence in Oklahoma Essay1345 Words   |  6 PagesThe Impact of Gang Violence in Oklahoma Gangs have had a huge impact in Oklahoma the many years they have been here. Gangs account for most of the drug trade, as well as most of the homicides in the Oklahoma area. Gangs are being fueled by the fear they have given the citizens, therefore most people are too afraid to do anything about the problem. â€Å"Every city in the world always has a gang, a street gang, or the so-called outcasts†.- Jimi Hendrix. http://www.brainyquote.com/quotes/keywords/gangRead MoreHispanic Gangs: Not Just a California Problem Anymore1475 Words   |  6 PagesGangs are not a new problem to the United States. Gangs have often been romanticized in literature and the media with a classic example being â€Å"West Side Story†. Americans have long been fascinated with the Mafia, and infamous gangsters such as Al Capone and John Gotti have even been elevated in status as cultural icons. Americans have seen an uprising in â€Å"Gangster Rap† since the early 1990’s. Many people tend to think of gangs in America as being made up primarily of young inner-city black males

Hiring Of Employees Free Essays

The school will higher teachers using a structured interview with allowance for questions that may arise. This will be done using qualified private recruiter company but after the establishment of the school the interviews will be undertaken by the administrators and at least three teachers. During the advertisement of the interview people from all academic background will be encouraged to apply especially the young and energetic. We will write a custom essay sample on Hiring Of Employees or any similar topic only for you Order Now A variety of issues will be considered at the time of the interviews. This will include the academic background, spirituality, leadership skills and extra curricula qualifications. After interviewing the candidates a selection will be done that will put into consideration the race, gender and professions. The school will have a head teacher who will be a professional teacher and an administrator who could be a retired teacher. The school will be expected to start on a small scale with only three grades. The initial number of teacher is expected to be at least six. The school will also hire a few other temporary teachers who will step in on special occasions. This could be collage students pursuing their studies in different fields who will open up the children to the mystery of different education a head of them. The special occasions will include when the regular teachers are on training. The professional teachers will be considered such that in every three teacher one should be a professional teacher. Other employees to be recruited will be the secretary, the drivers, cooks, gate keepers and the cleaners. Since the school will be of the lower grades the secretary will be expected to be of the same qualification as some of the teachers with good computer skills. All the other staff are expected to have some basic academic background that can enable them to communicate effectively. They should also be dedicated to their work and should be of good moral standards. Evaluation of the school employees The teachers the administrators and the other employees will be evaluated to find out if they are performing their duties effectively. The evaluation will consist of a list of questions that will give the performance index of the employee when answered. How to cite Hiring Of Employees, Papers

World Trade Business Price Descrimination

Question: Describe about the World Trade for Business Price Descrimination. Answer: 1.(i) Introduction The monopoly uses the price discrimination strategies to charge different prices for the same product to different persons, places, and usage to meet the goal of increased revenue. A monopoly will use the price discrimination to gain the market advantage or capture market position. The conditions that make a single seller to lower the price will be determined by whether lowering the price will; Upsurge the demand for the commodity hence raising the sales revenue of the firm Reduce the price individual are willing to pay when buying a good at the higher price. (ii) Analysis Based on the concept of demand and supply, lowering the price increases demand but reduce supply while increasing the prices decrease the demand but increase supply. This can be illustrated bellow: From the above diagram, it is possible that the single seller can discriminate using the first-degree price discrimination. This is done by splitting the market up into two. Those people with more wealth are charged higher while the poor people are charged low. The aim is to draw from every consumer the amount they can pay for the product. Therefore, where a monopoly wants to increase the demand for a commodity, he will lower the price to discriminatively charge different price say based on individuals, places or use of a product. On the other hand, the monopoly will increase the price by supplying less of the good but still get increased revenue due to the high prices charged (Varian, 2009). A personal price discrimination is used where there are two groups of individuals with different levels of economic (financial) status or wealth. Here, the single seller will lower the price for those who are considered poor to sell more goods but increase the price to the wealthy people but still increase revenue be by selling less at a high price. (iii) Conclusion It is concluded that a single seller can price discriminate based on wealth or economic status of people but still meet the goal of increased revenue. The seller will charge a lower price for poor people but increase demand and charge a high price for the rich by lowering demand, but revenue will still increase due to high price charged. 2. (i) Introduction Specialization increase efficiency in international trade where a country only produce what it can make best and trade to get the other commodities. No single country can produce all goods more efficiently than any other country and hence the need for specialization and trade. Countries have varying natural, capital, human resources besides varying strategies of combining such resources. The bottom line is that countries are not equally efficient at the production of commodities demanded by their citizens. There is always an opportunity attached to any decision to produce a given good. This cost describes the amount of another service or good that could otherwise have been produced (Hummels, Ishii Yi, 2001). (ii) Analysis Presented with a choice of producing one commodity or another, specialization dictates a country that it is more efficient to produce that commodity with the lower opportunity cost. The country should use the increased production of that product to trade for the product with the higher opportunity cost. In case an economy can produce more of product with the same resources which another economy can, it is understood to have an absolute advantage in the production of that particular product (Schott, 2004). One the other, where the second nation has an absolute advantage in the manufacture of a product which the first economy wants, the two countries will both better off specializing and trading. Conclusion Trade is, therefore, beneficial to both economies even where one nation has an absolute advantage in producing both goods to be traded. Presented with any two goods, an economy has a comparative advantage in the good that has a lower opportunity cost. They should make sure that the terms of trade are such that both economies lower the opportunity cost of the products being acquired from a trade. References Hummels, D., Ishii, J., Yi, K. M. (2001). The nature and growth of vertical specialization in world trade. Journal of international Economics, 54(1), 75-96. Schmalensee, R. (2011). Output and welfare implications of monopolistic third-degree price discrimination. The American Economic Review, 71(1), 242-247. Schott, P. K. (2004). Across-product versus within-product specialization in international trade. The Quarterly Journal of Economics, 647-678. Varian, H. R. (2009). Price discrimination. Handbook of industrial organization, 1, 597-654.