Module 3 Reflections
Please submit your reflections on what you’ve learned in Module 3. Your submission should be 500-600 words in word or pdf format.Module 3 Discussion: Crypto-currency and Blockchain
There has been global interest in creating and acquiring different
Crypto-currencies over the past 2-3 years but the market for these currencies
has been very volatile. Using example of the drastic changes in the value of
different currencies discuss why it is such a volatile market and if it can be
stabilized
Student 1 ReplyIn my
opinion, a flexible exchange rate plays a crucial role in smoothing output
volatility in emerging market economies “EMEs”. However, as highlighted by
several papers in this volume, a highly volatile exchange rate can increase
output volatility and itself become a source of vulnerability. Second, over the
past five years, most official forex interventions in EMEs were intended to
stem volatility rather than to achieve a particular exchange rate. Finally, the
majority view was that exchange rate intervention needs to be consistent with
the monetary policy stance. Persistent, one-sided intervention, associated with
sharp expansion of central bank balance sheets, creates risks for the economy.
I did read in an article that Lack of clout, undiversified economies, and
restrictive regulation are the contributing factors that make emerging market
currencies more volatile than their developed counterparts. The former two
contribute to the latter’s existence, which is what affects people like myself
the most in terms of restricting citizens’ financial freedom. I am not arguing
that emerging market countries should prioritize making it easier for people
like me to buy things on Amazon.com, though—instead, that perhaps a more
progressive approach could encourage more sustainable foreign investment and
economic development, with the spillover effects granting more financial
freedom to consumers.
With regards to the solutions, I would be fascinated to see an emerging market
country introduce a cryptocurrency and attempt to roll out a digital financial
economy. We could keep an eye on developments here, because it could usher in a
completely new concept of macroeconomic financial management.