Foreign Exchange Balance Policies

Foreign Exchange Balance Policies

1. Regimes

   • Fixed exchange rate
     • Currency board
     • No separate legal tender
     • Intermediate
     • Conventional
   • Flexible exchange rate
     • With intervention
     • No intervention
     • It provides capability to depreciate and appreciate
       • Equal to capability to modificative competitiveness
         • Leading to changes in external balance

2. External balance

   • Deficit
     • Necessity of financement
       • By net inflows of foreign capital
     • Sustainable
     • Otherwise
     • Evaluated by
       • Future payment commitments
   • Surplus
     • Capacity of financement
       • To foreign countries
     • Due to competitiveness
   • Reforms
     • In order to correct the situation
       • Deterioration of Fragil Five
         • Brazil+India+Indonesia+Turkey+South Africa

3. Economic policy

   • Economic policy
     • Expansionary
       • Depreciation
         • increase Competitiveness
     • Restrictive
       • Apreciation
         • Drop Competitiveness
     • Leading to changes in external balance
     • Key for problems of external balance
   • Fiscal policy
     • Anyway does not affect to the currency
     • Key for problems of internal balance

4. Internal balance

   • Deficit
     • Increase revenues
     • Decrease expenditure
   • Surplus
   • Reforms
     • In order to correct the situation