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The Monetary Policy Instruments

The new monetary policy also introduced a URVunit of real value ("Can Brazil..." 1994, p. 266). The URV will be Brazil's unit of account until a new currency is introduced. Thus, the URV is the standard of value, while the cruseiro is the means of payment. The value of the URV is pegged to the United States dollar at 647.50:1, while a daily value of the URV in cruzeiros is established by the Central Bank of Brazil "according to the daily loss of the currency's purchasing power" (p. 268).

On 1 July 1994, a new Brazilian currency, the real, was introduced ("Can Brazil..." 1994, p. 268). The real was fixed in value as equal to 2,750:1 URV. The fixed value of the URV to the United States dollar was changed to 1:1. Indexing in the Brazilian economy, thus, became a thing of the pastat least for the time being. Although a fixed rate between the URV and the United States dollar was established by Brazil, the Central Bank of Brazil thus far has allowed the foreign exchange market to determine the actual trading rate. The actual trading rate, thus, has averaged R1:$1.136, which means that a United States dollar buys only R0.88.

The Use of Monetary Instruments in the United Kingdom

In the summer of 1978, the member countries of the European Community agreed to the formation of the EMS (European Monetary System), and the organization became a functional reality in March 1979. The monetary policies of the member countries of the EMS are highly related to EMS policies (Barnhart and Wallace, 1994, pp. 255-267). While the United Kingdom was a member of the EMS from its inception, the country initially was not a participant in the major function of the EMSthe exchange rate management (ERM). United Kingdom participation in the ERM did not begin until October 1990.

The resilience and flexibility of the EMS has surprised even its most enthusiastic supporters. For all of its successes, however, the EMS does have some problems. O...

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The Monetary Policy Instruments. (1969, December 31). In LotsofEssays.com. Retrieved 13:39, December 20, 2014, from http://www.collegetermpapers.com/viewpaper/1304085584.html
 
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