The International Monetary System
DQ # 1
1-a) What opportunities might current IMF lending policies to developing nations create for international businesses? What threats might they create?
1-b) Do you think the standard IMF policy prescriptions of tight monetary policy and reduced government spending are always appropriate for developing nations experiencing a currency crisis? How might the IMF change its approach? What would the implications for international businesses?
DQ # 2 Based on the following case study
Airbus and the Euro Summary
This feature describes how Airbus is protecting itself from exchange rate fluctuations. French aircraft maker Airbus prices its planes in dollars. However, because over half the company’s costs are in euros, the company has the potential to see significant fluctuations in its earnings if it does not hedge its foreign exchange exposure. The following questions can help in the discussion of the feature.
2-a) What type of foreign exchange exposure does Airbus face? How can Airbus protect itself from its exposure to changing exchange rates? How does the company’s switch to more U.S. suppliers help the company?
2-b) Airbus has asked its European-based suppliers to start pricing in U.S. dollars. What does Airbus hope to gain by this request? What does it mean for suppliers?
Teaching Tip: You can learn more about Airbus by visiting the company’s web site at {http://www.airbus.com/en/}.
