Financial Markets and Institutions (2-downloads)

16. Are controls on capital outflows a good idea? Why or

why not?

17. Discuss the pros and cons of controls on capital inflows.

18. Why might central banks in emerging-market coun-

tries find that engaging in a lender-of-last-resort oper-

ation might be counterproductive? Does this provide

a rationale for having an international lender of last

resort like the IMF?

19. Has the IMF done a good job in performing the role of

the international lender of last resort?

20. What steps should an international lender of last

resort take to limit moral hazard?

Q U A N T I TAT I V E   P R O B L E M S

1. The Federal Reserve purchases $1,000,000 of foreign

assets for $1,000,000. Show the effect of this open

market operation using T-accounts.

2. Again, the Federal Reserve purchases $1,000,000 of

foreign assets. However, to raise the funds, the trad-

ing desk sells $1,000,000 in T-bills. Show the effect

of this open market operation using T-accounts.

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Chapter 16 The International Financial System