It may be to promote trade or international cooperation.

In the absence of government controls, there would be an entirely free or floating exchange rate

In operation. With a freely floating system, no gold and foreign exchange reserves would be required

as the exchange rate would adjust itself until the supply and demand for the currencies were

brought into balance. There are merits in fixing exchange rates, or in adopting one of many hybrid

systems which lie between these extremes. Fluctuations in the rate may be inconvenient for trading,

and these fluctuations could be volatile if left to move freely. Moreover, because of the pressure

of short-term capital movements or speculation, the exchange rate could move in a direction different

from that justified by conditions in the domestic economy (exchange-rate overshooting).

The system of fixed rates has been criticized on the grounds of its inflexibility and the fact that

It places too much of the adjustment burden on the domestic economy. A middle course has been

proposed in the “moving parity,” “sliding parity,” “dynamic” or “crawling peg” idea. In the moving

parity, the par rate is automatically adjusted according to a moving average of past rates taken

over a number of months. Under the sliding parity, instead of the whole amount of a revaluation or

devaluation taking place at once, it is spread in small percentages over a number of months, e.g. a

10 per cent devaluation may be achieved by a monthly 0.2 per cent reduction for fifty months. This

system has the advantage that it is known and certain, while the monthly adjustment is too small to

cause excessive speculative flows. Under the crawling peg, the gradual adjustments in the exchange

rate are linked to the level of a country’s reserves rather than past exchange rates. Portugal followed

a “crawling peg” policy for the escudo for a period until 1990 during which it was devalued by

0.25.per cent per month. The fixed exchange-rate regime that truly combines flexibility with stability

had proved elusive.

Commentary and Notes to Text 9.7.1.3

1. to induce the adjustment — стимулировать регулирование

2. to offset — компенсировать

3. albeit — хотя

4. there are merits in fixing exchange rates — есть достоинства в фиксировании валютных

курсов

5. volatile (fluctuations) — нестабильные, изменчивые (колебания)

6. exchange-rate overshooting — чрезмерное повышение валютного курса

7. sliding parity — скользящий паритет

8. revaluation — повышение стоимости

9. crawling peg — ≪ползущая≫ привязка

10. the escudo — эскудо — стандартная денежная единица Португалии до 1999 г.

11. elusive — ускользающий, уклончивый, неуловимый

9.7.2. Match the following terms with the correct definition

Work with a partner.

1.freely floating (or flexible)

exchange rates

2. appreciation

3. depreciation

131

9*

4. dirty float

5. reva )e d c ase irsnoptek saceghno tesn

i .itrsacedhnopuySmlpu led lac ltfedow laeseta trah t raceghnx E)fonirtau.le6avd ceagxhn blfua.eta racedghnxis f’cenyrsae iracenula iltracenuifA fnoseta. rcenulstek ifno t raceghnxmiero sabknlaseta fsaco itrcehnw i racedghnxiA iltrsaenoy ilfaebdnxlsy itfebnwm.iracednula iltracenuifsenoAicen.rcureh tosm fo tren icenyrse saedom ircut iltfracehnouvAseicen.rcgnuiero fsm iltfracedhnouvAtion

rates or floating

exchange rates.

9.7.3. Read concepts in brief, complete them using the words from the box, and translate them

into Russian

a derived demand, equilibrium, foreigners’ demands, the relative rates, currency,

the demand, the supply, relative economic stability

1. The foreign exchange rate is the rate at which one country’s ... (1) can be exchanged for another’s.

2. The demand for foreign exchange is ... (2), it is derived from the demand for foreign goods and

services (and financial assets).

3. The supply of foreign exchange is derived from ... (3) for our goods and services.

4. In general, the demand curve of foreign exchange slopes downward and the supply curve of

foreign exchange slopes upward. The ... (4) foreign exchange rate occurs at the intersection of

the demand and supply curves for a currency.

5. A shift in ... (5) for foreign goods will result in a shift in the demand for foreign exchange. The

equilibrium foreign exchange rate will change.

6. A shift in ... (6) of foreign currency will also cause a change in the equilibrium exchange rate.

7. Purchasing-power parity occurs when changes in the exchange rate for two currencies reflect

only changes in ... (7) of inflation in those two countries.

8. Changes in relative real interest rates, productivity, product preferences, and perceptions of ...

(8) affect foreign exchange rates.

9.7.4. Written/Oral Practice

Make up sentences and microdialogues with the following word combinations on the subject of the

unit.

Work with a partner.

а) повышение — rise, increase, upsurge

rise in the market (in quotation) — повышение

sceran scrahnpu iergonpwi пшвоыениеi—

132

обесценение денег

с) обесценивание, обесценение depreciation; (US) shrin kage — onitceradp—обесценение,d seodp sеоб ifсoдцn iteвоitcerаеaнpенли

евк—

обесценивание; (девальвация) — devaluation

depreciation of money, money —

devaluation of paper money — обесценение

d epreciation (shrinkage) of the dolar — обесце

бумажны х денегар ненли едло

depreciation (devaluation) of currency, c duepreciartion orf golde — обnесцененcие зyолота

depreciation (devaluation) — о б iеnflatсionaцry deеprecнiatioеn —н обесицененеие

валюты инфляционое

depreciation of currency in relation to gold depreciation o—f capital -обесценение капитала

обесценение валюты относительно золота

depreciation of the rouble — обесценение рубля

depreciation of currency against major c u erpdrecriatioen of tnhe pocund —i оeбесцsенен ие— фунта

обесценение валюты по отнош е н стиерлюинг окв

основным валютам

d) (снижение, падение) cut back, fall, downsloping, decline, decrease, drop, slide, downdrift;

(о курсах, ценах) lowering, sinking, reduction, sag, setback, cut, devalorization, roll-back;

(о конъюнктуре) downturn, depression; weakness — (бирж.)

price drop — снижен ие биржевого курсаf -ceagxhn ,fseoplum tceragxhn iltan

downturn — сниже ние конъюнктуры падасруени ек

decline in rates, price drop, price w e fall ink profnits —e сниsжеsние при—были

понижен ие курса odw ипnеонтсои-e тесмжitrw—

devalorization of currency — снижение redкuction in у(of) the disрcount rateс, lowerinаg of he t

валюты bank rate — снижение учетной ставки

decline in business activity — снижение д slump oеf security prлices — паденоие курса ценных

вой активности

бумаг

decline in

exports—падение,снижение экспорта