IMF, FOREX, and International Business in Emerging Markets

Satyendra Singh

Chapter 43 in The Palgrave Handbook of Experiential Learning in International Business, 2015, pp 714-729 from Palgrave Macmillan

Abstract: Abstract The International Monetary Fund (IMF) and the foreign exchange market (FOREX) are inextricably linked in the global marketplace. This chapter explains how these two institutions are connected and how they affect governments’ monetary and fiscal policies. The IMF aims to promote monetary cooperation, stabilize foreign exchange rates, facilitate international business, and, most importantly, reduce poverty and extend assistance to members having balance of payments difficulties. However, the lacking ability of IMF to successfully assist a nation in coming out of the red zone has been heavily scrutinized by critics, as the IMF has on numerous occasions lacked the flexibility required to fix the situation. A related concept to the IMF is the FOREX, which aims to manage and oversee the trading of foreign exchange of major currencies. Under FOREX, monetary policy of a country is no longer dependant on the value of other countries’ currencies; it is based on demand and supply of the currency that enables the country to create its own policies to govern domestic interest rates. But the exchange rate flexibility provides no protection from foreign interest rate fluctuations when the governments reduce their interest rates to zero or even set a negative interest rate as is the case of European Central Bank. These facts lead to the debate as to the effectiveness of IMF and FOREX, particularly in the context of developing countries and emerging markets. Therefore, the chapter is designed to turn the debate into experiential learning by undertaking a series of activities in the following nine areas: IMF voting quota, the quota and governance reform, the proposed new quota formula, currency devaluation, reluctance of countries to free float their currencies, removal of pegged currencies, the role of central banks in setting interest rates, arbitrage creation, and foreign exchange speculations using Fisher effects theory.

Keywords: Exchange Rate; Interest Rate; Gross Domestic Product; Monetary Policy; Central Bank (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-46772-0_43

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137467720

DOI: 10.1057/9781137467720_43

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().