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Social Science Clinic => Economics => Topic started by: mpobi80 on May 25, 2020

Title: What are the main ways in which foreign exchange transactions could be controlled?
Post by: mpobi80 on May 25, 2020

Question 1

Give reasons why it is likely to be difficult for the G20 countries to achieve harmonisation of their economies?

Question 2

What are the main ways in which foreign exchange transactions could be controlled?

Title: What are the main ways in which foreign exchange transactions could be controlled?
Post by: Loise Hard on May 25, 2020

Answer 1

1)	The G20 countries are usually more concerned about their own national interests than

international ones.

2)	Countries today have little power, given the huge scale of international financial flows.

3)	Achieving similar rates of economic growth may involve considerable differences between the

countries with respect to other macroeconomic indicators.

4)	Countries' budget deficits and national debt differ substantially as a proportion of their national

income.

5)	General harmonisation of policies is possible only if there is convergence of the G20 countries,

and that has not been achieved.

Answer 2

There are four main ways:

1)	Having to deposit part of the transaction, without interest, in the central bank.

2)	Limits on the proportion of a firm's assets that can be traded in a given time.

3)	A 'Tobin tax' of, say 0.5% per transaction.

4)	'Old-fashioned' exchange controls.