B. Monetary system in Kuwait (1500 words)
Government Intervention in Exchange Rate Market: Kuwait is a country with the strong exchange rate in the world and move from US dollars pegging to pegging with the GCC currencies to maintain its inflation rate in the country.
Government intervenes in the exchange market for the purpose of maintaining equilibrium in prices, to enhance competitiveness, to encourage financial stability, to control inflation rate and to stabilize the interest rate in the country.
The government in order to make monetary policy relaxed or conservative depending on the situation makes purchases or sale in the exchange rate market to stabilize the prices.
There are various factors that need to be considered by the government of the Kuwait like the development stage of the Kuwait, Kuwait’s vulnerability to shocks, progress and development of financial markets and the government integration with international markets and the other countries of the world (Diplomacy in action, 2014).
Continued...
Government intervenes in the exchange market for the purpose of maintaining equilibrium in prices, to enhance competitiveness, to encourage financial stability, to control inflation rate and to stabilize the interest rate in the country.
The government in order to make monetary policy relaxed or conservative depending on the situation makes purchases or sale in the exchange rate market to stabilize the prices.
There are various factors that need to be considered by the government of the Kuwait like the development stage of the Kuwait, Kuwait’s vulnerability to shocks, progress and development of financial markets and the government integration with international markets and the other countries of the world (Diplomacy in action, 2014).
Continued...
Government Intervention in Exchange Rate Market
Types of the Intervention
Direct Intervention
Indirect Intervention
Cost and Benefit Analysis through Intervention of Government in Exchange Market
Recent Example of Kuwait Government Intervention in Exchange Market
Influence of current policy on the economic ability of each GCC country in setting its interest rate
References
Types of the Intervention
Direct Intervention
Indirect Intervention
Cost and Benefit Analysis through Intervention of Government in Exchange Market
Recent Example of Kuwait Government Intervention in Exchange Market
Influence of current policy on the economic ability of each GCC country in setting its interest rate
References
