Bretton Woods Exchange Rate System (1944) In 1944, as World War II drew toward a close, the Allied Powers met at Bretton Woods, New Hampshire, in order to create a new post-war international monetary system. The Bretton Woods Agreement, implemented in 1946, whereby each member government pledged to maintain a fixed, or pegged, exchange rate for its currency vis-Ã -vis the dollar or gold. These fixed exchange rates were supposed to reduce the riskiness of international transactions, thus promoting growth in world trade. The Bretton Woods Agreement established a US dollar-based international monetary system and provide for two new institutions, The IMF and the World Bank. The IMF aids countries with balance of payments and exchange rate problems. The International Bank for Reconstruction and Development (World Bank) helped post-war reconstruction and since then has supported general economic development. The IMF was the key institution in the new international monetary system, and Continue reading
International Economics
Unemployment – Meaning, Causes and Effects
The economists describe unemployment as a condition of jobless within an economy. Unemployment is lack of utilization of resources and it eats up the production of the economy. It can be concluded that unemployment is inversely related to productivity of the economy. Unemployment generally defined as the number of persons (It is the percentage of labor force depends on the population of the country) who are willing to work for the current wage rates in society but not employed currently. Unemployment reduces the long run growth potential of the economy. When the situation arises where there are more other resources for the production and no man power leads to wastage of economic resources and lost output of goods and services and this has a great impact on government expenditure directly. High unemployment causes less consumption of goods and services and less tax payments results in higher government borrowing requirements. The Continue reading
4 Important Types of Decentralization
The term “decentralization” embraces a variety of concepts which must be carefully analyzed in any particular country before determining if projects or programs should support reorganization of financial, administrative, or service delivery systems. Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi-independent government organizations and/or the private sector—is a complex multifaceted concept. Different types of decentralization should be distinguished because they have different characteristics, policy implications, and conditions for success. Types of decentralization include political, administrative, fiscal, and market decentralization. Drawing distinctions between these various concepts is useful for highlighting the many dimensions to successful decentralization and the need for coordination among them. Nevertheless, there is clearly overlap in defining any of these terms and the precise definitions are not as important as the need for a comprehensive approach. Political, administrative, fiscal and market decentralization can also appear in different forms and Continue reading
Conditions and Forms of Price Discrimination
In today’s economic conditions in which the markets being far from full competitive state resulted the firms functioning in this market to become more or less a price-maker. For this reason, one of the ways for the firms that aim to increase the total income thus the total profit can use is, to implement different pricing for consumers with different specialties instead of applying the same pricing for all the consumer groups. Because the consumers having different income levels, taste and choice cause them to have a desire to pay different price for the product in question. One of the pricing strategies foresees different pricing for different consumer groups is price discrimination. The implementation of price discrimination will bring the firm that aims to maximize the profit in an advantageous position in the market. This advantage, generated from the desire of consumers that have different taste and income who are Continue reading
Preventing Panic-Buying During Crisis Times
Panic-buying is a relatively common behavioral response to a crisis that people can exhibit in situations that they perceive to be dangerous and unpredictable. This behavior was previously observed in the wake of major natural disasters, such as earthquakes and hurricanes. Several factors can account for an increase in stockpiling and panic-buying behaviors. Access to excessive amounts of information during a crisis can result in a cognitive overload, which, in turn, leads to irrational behavioral patterns. Information overload can result in health anxiety, which prompts self-isolation and the tendency to make illogical purchases. The fear of the unknown causes coping behavior in the form of panic-buying and stockpiling. Therefore, it leads to the conclusion that panic-buying can emerge as a form of stress response in certain individuals. Peer pressure can contribute to irrational decisions in time of crisis as well. Panic-buying is defined as herd behavior, in which an individual Continue reading
Concept of Export Diversification in International Business
Earlier a country’s economic development was based either on the degree of specialization or diversification of a country’s production and trade structure. Based on Adam Smith’s concept towards the division of labor and specialization for economic growth and development to Heckscher-Ohlin Samuelson (HOS) model of international trade, countries should specialize in producing and specializing in the goods in which they have a comparative advantage. However, after the Second World War, the idea was that economic growth and development may be achieved by export diversification (not specialization). There were active efforts by the government to promote industrialization and economic growth. Export diversification is often the primary objective of many developed countries. Export diversification is also equally important for many developing countries. Some of the developing countries are dependent on a relatively small range of products, generally agricultural commodities. In other words, primary products constitute a large percentage of their overall export Continue reading