Global Citizens

 

Suppose that, as a financial analyst, you are tasked with evaluating Blades, a U.S. manufacturer of
roller blades. In the assignment, you provide the chief financial officer (CFO) of Blades a better
understanding of the process of government intervention and its impact on Blades’ international
business. The company generates most of its revenue and incurs most of its expenses in the United
States. However, it has recently begun exporting roller blades to Thailand. You will provide a
report that includes your assessment of the Thai government intervention and its impact on the
exchange rate of baht. You are asked to analyze the following issues and provide solutions to
Blades.
 Discuss whether the intervention effort by the Thai government constitute direct or indirect
intervention.
 Discuss whether the intervention by the Thai government constitute sterilized or nonsterilized
intervention and the difference between the types of intervention.
 Which type of government intervention (sterilized vs. nonsterilized) do you think would be
more effective in increasing the value of the baht? Once you choose one of the types, justify
your answer.
 If the Thai baht is virtually fixed with respect to the dollar, what would happen to the U.S.
levels of inflation?
 What are some of the potential disadvantages for Thai levels of inflation associated with the
floating exchange rate system that is now used in Thailand?

 

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