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An Essay About Currency War

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Macro Economics

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University of Miami

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Running head: CURRENCY WAR 1
Currency War
Student’s Name
Institutional Affiliation

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CURRENCY WAR 2
Currency War
Currency is a vital element in the international economy. It refers to any form of money
that is used during transactions. Currency facilitates the exchange of goods and services in world
trade. Over the years, the currency has undergone tremendous changes. Today, money exists in
the form of coins, paper, and virtual currency such as bitcoins. Usually, governments issue
currencies and control their circulation within the jurisdiction. However, some currencies like the
euro, the U.S. dollar, and the Japanese yen are recognized internationally. Crucially, most
countries and international businesses accept the dollar as a means of payment. The U.S. dollar is
one of the strongest international currencies because a stable economy supports it. Despite the
progress, world economies have experienced constant currency wars and conflicts that have
caused inflation, stagnation, and world trade collapse.
Currency Conflicts and Impacts on Trade
Currency conflict is a destructive event in the global economy. According to Bergsten
and Gagnon (2017), currency conflict refers to a situation whereby a country deliberately lowers
the value of its currency to take advantage of international trade. Generally, the economic and
market forces determine the value of a currency under the floating exchange rate system.
However, some countries, especially those in the emerging economies, defy this market rule by
engineering a competitive devaluation and depreciation that weaken their currencies. They
devalue their fixed exchange rates and depreciate flexible exchange rates. Countries engage in
currency manipulation for different reasons. First, currency devaluation enhances a country’s
competitiveness in the international market. Bergsten and Gagnon (2017) posit that currency
devaluation involves raising the prices of imports and lowering that of exports. This enables the
country to expand and capture a more significant market share than it would have achieved under

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Running head: CURRENCY WAR 1 Currency War Student’s Name Institutional Affiliation CURRENCY WAR 2 Currency War Currency is a vital element in the international economy. It refers to any form of money that is used during transactions. Currency facilitates the exchange of goods and services in world trade. Over the years, the currency has undergone tremendous changes. Today, money exists in the form of coins, paper, and virtual currency such as bitcoins. Usually, governments issue currencies and control their circulation within the jurisdiction. However, some currencies like the euro, the U.S. dollar, and the Japanese yen are recognized internationally. Crucially, most countries and international businesses accept the dollar as a means of payment. The U.S. dollar is one of the strongest international currencies because a stable economy supports it. Despite the progress, world economies have experienced constant currency wars and conflicts that have caused inflation, stagnation, and world trade collapse. Currency Conflicts and Impacts on Trade Currency conflict is a destructive event in the global economy. According to Bergsten and Gagnon (2017), currency conflict refers to a situation whereby a country deliberately lowers the value of its currency to take advantage of international trade. Generally, the economic and market forces determine the value of a currency under the floating exchange rate system. However, some countries, especially those in the emerging economies ...
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