In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency.
THE FOREIGN EXCHANGE MARKET
(forex, FX, or currency market) is a worldwide decentralized over-the-counterfinancial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies
A FLOATING EXCHANGE RATE
or fluctuating exchange rate is a type of exchange rate regimewherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency. It is not possible for a developing country to maintain the stability in the rate of exchange for its currency in the exchange market.
THE TERM BUSINESS CYCLE
(or economic cycle) refers to economy-wide fluctuations inproduction or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (expansion or boom), and periods of relative stagnation or decline (contraction or recession).
THE EXCHANGE RATE REGIME
is the way a country manages its currency in respect to foreigncurrencies and the foreign exchange market. It is closely related tomonetary policy and the two are generally dependent on many of the same factors.
THE GLOBAL FINANCIAL SYSTEM (GFS)
is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level. The main players are the global institutions, such asInternational Monetary Fund and Bank for International Settlements, national agencies and government departments, e.g., central banks and finance ministries, private institutions acting on the global scale, e.g., banks and hedge funds, and regional institutions, e.g., the Eurozone.
THE INTERNATIONAL FINANCE CORPORATION (IFC)
promotes sustainable private sector investment in developingcountries.IFC is a member of the World Bank Group and is headquartered in Washington, DC. It shares the primary objective of all World Bank Group institutions: to improve the quality of the lives of people in its developing member countries.
THE WORLD BANK GROUP (WBG)
is a family of five international organizations that makes leveraged loans, generally to poor countries. The Bank came into formalexistence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference
THE INTERNATIONAL MONETARY FUND (IMF)
is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact onexchange rate and the balance of payments.
INTEREST RATE PARITY
or sometimes incorrectly known as International Fisher effect, is an economic concept, expressed as a basic algebraic identity that relates interest rates and exchange rates. The identity is theoretical, and usually follows from assumptions imposed in economic models. There is evidence to support as well as to refute the concept.WORLD BANK
is a term used to describe an international financial institution that provides leveraged loans to developing countries for capital programs. The World Bank has a stated goal of reducing poverty. By law, all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment.
is the imposition of...