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Research Paper

Question in Focus:

What happens to the price of imports if a country’s currency is weak?

Back in the days before the occurrence on the hard blow of the weakening state of the international trade system and financial stand, it was a good thing if a country has a strong currency. It meant stability and confidence on establishing and supporting local businesses. However, when the financial down turn happened at the beginning of year 1997, situations changed. It seemed that the ones who have higher currency values are the ones who suffered more because of the sudden adjustment in the market. Hence, as a result, there is now a sense of difference in seeing the value of a high currency status of a country compared to the weakness of another nation’s currency.

Relatively, it could be understood that the weaker the currency of a nation is, the safer it stands in the face of sudden change in the market’s financial status (Barun, 2001, 55). Adapting negative interest systems allowed countries with lower rate of currency value to find a way to support lower level of economies in their country to slowly yet surely help the overall national economy to recover from the possible failure that has been incurred. When the currency of a country is weak, it is most often than not that it is not fully affected by the sudden drop of the financial status of the resources in the international market.

For instance, Japan’s programme on the Quantitative Easing process or QE entails to create a possibility of balancing both the incoming and outgoing value of financial assets in the country (Perry, 1999, 780). It hopes to make a lesser appeal on yen from the market hence retaining its value at a lower rate. The Japanese financial administrators believe that through this approach, they would be able to gradually make the value of yen stronger than others in latter conditions of business operations and trade in the international market. This has been considered true and effective especially during the strike of the international financial crisis. The system specifically insists that currency rates be controlled better hence allowing foreign-exchange money operations to make a distinctive ‘appeal’ on the low-rate currency (Tilly, 2001, 182). It is because of this that somehow, the investors look towards a long-time result of their invested money than remaining focused on the conditions of the currency rate of the country at present. Foreseeing growth of market is then assumed important in line with this consideration of the real value of currency rate status.

How does this affect the ability of German companies to import technology and equipment?

Being the fourth largest GDP earner in the world, Germany’s currency could be considered more stable than weak. Because of the emergence of industrial capitalism, Germany became a specific source of innovatively designed technologies that are released in the international market at present. Understandably though, it could be realized that somehow, the condition of innovation specifically notes that Germany also intends to import technologies they use for the production of their own branded produce of technology-based manufactured products. Among the primary products the country imports include energy and some industrial materials used to build most of the country’s high-end projects (Tassey, 2012, worldwide web).

To make it easier for the country to import products they need to be able to continue their projects for industrialization and national development, Germany tries to retain a stable currency rate rather than a strong one. This instance makes a great impact on how the investors would try to establish alliances with the country and thus lower down the prices of the product that they export into the German market. Retaining such a financial status of resources in the country specifically makes it easier for the nation’s administrators to specifically manage through the twists and turns of the market. Creating productivity policies that would ensure the growth of the market specifically allows the German administration to handle investment strategies that would invite more investors and establish stronger local markets that would further empower the overall economy of the country.

Carrying on a growth model that tends to retain the currency of the country at a balance although it is one of the top performers in the export-import market enables the nation to handle financial depressions in a much comprehensive manner allowing the lower edge of its market to empower the increase of the national GDP. This means that the creation of balanced performance from both the large and small firms become adept in supporting the economic empowerment the nation needs. This way, the importation of technological materials and equipments become an easier choice for the country to take a responsibility that is handled with effective management by the financial administrators assigned to foresee import transactions.

Through this manner, Germany does not only assure a stable growth in terms of their industries’ development, they also retain a strength in becoming more adept in gaining control over their financial resources hence making a relative response to possible highs and drops in the international market. With a stable to currency compared to as strong one, Germany is able to immediately adjust to the situation of the international market and fund both its internal and external trading transactions. This way, the country becomes strong enough to face another chapter of financial growth rather than drown in debt and frustrations from higher expectations through having higher rate of currency levels (Barun, 2001, 45). In a way, the system of economic balance that Germany adapts to specifically allows it to manipulate its resources effectively for the sake of making a good stand in assuring the course of its journey towards a much stronger economy able to face the challenges of international financial drops.

References:

Tassey, G. (2012). Beyond the Business Cycle: The Need for a Technology-Based Growth Strategy. http://www.nist.gov/director/planning/upload/beyond-business-cycle.pdf. Retrieved on May 5, 2013.

Tilly, Richard. (2001). “Germany: 1815-1870″ in Rondo Cameron, ed. Banking in the Early Stages of Industrialization: A Study in Comparative Economic History (Oxford University Press.  Pages 151-182.

Braun, Hans-Joachim. (2001). “The German Economy in the Twentieth Century“, Routledge.

Perry, Matt “Mason, Timothy” pages 780-781 from The Encyclopedia of Historians and Historical Writing edited by Kelly Boyd, Volume 2, London: Fitzroy Dearborn Publishing, 1999 page 780.

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