Compare and contrast a pegged exchange system and a dirty float system of exchange rates.

collect duties on imported products and convert the currency of one country into the currency of another.

insure companies against foreign exchange risk and set interest rates charged to foreign investors.

collect duties on imported products and set interest rates charged to foreign investors.

convert the currency of one country into the currency of another and provide some insurance against foreign exchange risk.

the globalization of the world economy.

the general increase in trade barriers over the past 30 years.

firms are trying to circumvent trade barriers.

there is a shift toward democratic political institutions and free market economies.

modeled along the lines of the Bretton Woods system will not work.

allows each country to choose its own inflation rate.

is characterized by speculation that adds to the uncertainty surrounding future currency movements.

leads to a situation where governments under political pressures expand monetary supply too rapidly, causing unacceptably high price inflation.

High-technology industries in which protecting firm-specific expertise is of paramount importance and licensing is hazardous.

Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations.

Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations.

In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.

foreign market hazard.

global jeopardy.

foreign exchange risk.

commerce uncertainty.

Regulations that discouraged British banks from trading in the Eurocurrency market

Strengthening of the British pound against major European currencies in the 1960s

Collapse of the Bretton Woods system

Prohibition of British banks from lending British pounds to finance non-British trade

currency swap.

arbitrage.

backwardation.

straddle.

gold standard.

Bretton Woods system.

fixed exchange system.

floating exchange rate system.

The strong economic performance of those developing countries that embraced capitalism rather than radical ideology

The collapse of communism in eastern Europe

The generally abysmal economic performance of those countries that embraced the radical position

A growing belief in many capitalist countries that MNEs tightly control key technology and that important jobs in the MNEs' foreign subsidiaries go to home-country nationals

it enables participants to achieve gains from the free flow of trade.

it enables participants to achieve gains from the free flow of investment.

it allows countries to specialize in the production of goods and services that they can produce most efficiently.

linking neighboring economies creates incentives for cooperation between the neighboring states and reduces the potential for violent conflict.