Managing currencies (NP)

Episode number 8 of Series “The Global Economy”.
The value of currency exchange rates has a crucial role in a nation’s economy, affecting the rate of import and export, as well as the rate of unemployment and inflation. In this episode of the Open Learning Economics course we study the ways in which governments can intervene in fixing a value to their currency. The first part of the episode we look at the economic crisis precipitated by a strong US dollar in the 1980s. President Ronald Reagan’s committment to laissez-faire economics meant that the German Deutschmark and the Japanese Yen consistently traded more effectively against the US dollar, resulting in loss of production and increasing unemployment in the United States. A panel of economists analyse the effectiveness of the Plaza Accord, initiated by Ronald Reagan and James Baker in the late 1980s, to reverse some of the imbalances of a free-floating exchange rate. In the second example, we look at the attempt of the Thatcher government in Great Britain to fix the exchange rate of the pound, in an attempt to curtail spiralling inflation and unemployment.