Abstract
Several monies have important hedge characteristics, providing especially high returns in certain types of crisis. Well-known examples include the British pound in its role of an energy-hedge, the Swiss franc and US dollar as war-hedges, the Deutsche mark and Swiss franc as hedges against US hyperinflation. Other monies have important counter-hedge or fairweather characteristics. Examples include the Japanese yen, for which the energy market being in glut is a source of strength, and the Canadian dollar which thrives on economic boom in the US and in the world economy. These possible hedge and fairweather qualities of monies have implications for both their exchange rate behaviour and their international popularity — the subject of the present chapter.
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Notes and References
For a discussion of the possibility of crisis, see C. Kindleberger, Manias, Panics, and Crashes (Macmillan, 1978) Chapter 10.
The distinction being made here is similar to that of R. Z. Aliber in ‘The Firm Under Pegged and Floating Exchange Rates’ in J. Herin et al. (eds), Flexible Exchange Rates and Stabilization Policy ( Macmillan, 1977 ). Aliber distinguishes here between ‘price risk’ (a shift in the ratio of the price of tradable to non-tradable goods) and ‘exchange risk’.
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© 1982 Brendan Brown
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Brown, B. (1982). Hedge Monies. In: A Theory of Hedge Investment. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-06103-7_8
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DOI: https://doi.org/10.1007/978-1-349-06103-7_8
Publisher Name: Palgrave Macmillan, London
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