Exchange Rate Stabilisation at a Time of Financial Crisis - An Attempt at Assessment

Abstract

The recent volatility of exchange rates of practically all currencies exerts a direct influence on import/export prices, interest rate levels, state budget revenues and profits. This has had a destabilising effect on national economies and consequently triggered a financial crisis, i.e. the situation that we are currently in. One important factor is the apparent dependence of financial markets on the monetary and exchange rate policies pursued by the financial institutions of key-currency countries. These institutions, accordingly, have a great deal of responsibility for stabilising key financial markets and collaboration between the main institutions of the Triad, i.e. the US Federal Reserve, the Bank of Japan and the European Central Bank. In the absence of coherent, unified and widespread stabilisation mechanisms at the level of national economies and in the face of speculative behaviour by private and institutional investors, plus speculative strategies being commonly adopted by businesses, international financial markets remain highly turbulent and companies have to cope with a rising expense bill.