The document discusses various foreign exchange systems and concepts. It begins by outlining different exchange rate systems such as the gold standard, par value, crawling peg, and floating systems. It then discusses hard and soft currencies, the functions of currency, and the foreign exchange market including the spot and forward markets. The document also covers foreign exchange rates, equilibrium, and the effects of devaluation. It concludes by classifying exchange rate regimes and outlining various financial strategies related to foreign exchange.

1. Foreign Exchange
Management
• Exchange-Rate Systems
- Gold Standard
- Par Value (Adjustable Peg)
– Crawling Peg :– a fixed exchange
rate in
which regular (frequent?) periodic
adjustments
– Floating (Flexible) System: No
Government Interference, Market
Forces dictate equilibrium exchange
rates, Value of a nation’s currency
allowed to “float” down or up

2. Money
• Hard (International) Currencies
vs. Soft Currencies
• Functions of Currency
- medium of exchange
- unit of account
- store of value

3. Foreign Exchange Market
• Credit (Financing)
• Clearing
• Hedging
• Spot Market vs. Forward
Market

4. Foreign Exchange Rate
• Currency Equilibrium
• Effect of Devaluation
- Exports and
Employment
- Imports & Consumer
Welfare

5. Exchange Rate Systems
• Gold Standard
• Par Value (Adjustable Peg)
• Crawling Peg (Sliding or Gliding
Parity)
• Wide Band
• Floating (Flexible) System

6. Official Classification of
Exchange Rate Regimes
• Floating Exchange Rate Regimes
- independently floating regimes
- managed floating regimes
• Intermediate Exchange Rate
Regimes
- soft pegs
- tightly managed floating regimes
• Hard Peg Regimes
- currency boards
- exchange rate regimes with no separate
legal tender

7. Financial Implications
and Strategies
• Early Warning Systems
• Hedging
• Leading and Lagging
• Invoicing
• Pass-Through Costs
• Other Strategies