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Volume :30 Issue : 3 2002      Add To Cart                                                                    Download

The Western Banks: Interference Policy and Possible Cooperation

Auther : Abdel-Muo’ti R. Arsheed

This study investigates the issue of interference policy carried out by the western countries since the floating of the exchange rate in 1973, in terms of characteristics and growth. However, each country used to practice its interference policy in its own way, which supports its currency when it becomes weak. This process was done without coordination with the other European countries. This study also discusses the preferences of the said countries in adopting an interference’s instrument to deal with the unbalanced exchange rate. It also highlights the areas at which such policy could interfere, where interest rate and the reserve of foreign currency would have the main focus. It illustrates the procedures followed by the mentioned countries to lower the resulted risk factor from the unbalanced exchange rate. This study ends up by clarifying the fact that the interference policy can be active and fruitful if it is left to the market forces. The advantages of setting out such a policy would achieve more control and a real implementation of the floating system.

Key words: Stabilization policies, Reserve formation policies, Floating system, Interest rate parameters, Exchange market preference policies, Price and output stabilization policies.

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