1. How can you quantify currency risk in a floating exchange rate system?
2. Why might it be hard to quantify currency risk in a target zone system or a pegged exchange rate system?
7. What is the effect of a foreign exchange intervention on the money supply? How can a central bank offset this effect and still hope to influence the exchange rate?
9. Describe two channels through which foreign exchange interventions may affect the value of the exchange rate.
11. How do developing countries typically manage to keep currencies pegged at values that are too high? Who benefits from such an overvalued currency? Who is hurt by an overvalued currency?
13. Describe two different currency systems that have been introduced in countries such as Hong Kong and Ecuador to improve the credibility of pegged exchange rate systems.