Study On Currency Crisis: The Economy Imbalance,the Exchange Rate Misalignment And The Current International Monetary System

Since the Broodwood system collapsed, Currency crises occur frequently and widely,they affect global economy badly. Therefore it is significant to study currency crisis under thecurrent international monetary system. The exchange rate deviates from the equilibriumexchange rate badly and fluctuates widely, which is the main cause of currency crisis.However the fundamental cause is the economy imbalance. The object of the paper is toanalyze the relationship of economy balance and currency crisis and defend the currencycrisis by the theory of equilibrium exchange rate and economy balance theory under thecurrent international monetary system.It is significant to define the currency crisis accurately under the current internationalmonetary system. Based on previous theory, the paper thinks currency crisis is currencyphenomenon which is induced by the exchange rate deviating from the equilibrium exchangerate badly and fluctuating widely. Exchange rate's misalignment is the main cause of currencycrisis.As the international circumstance, the international monetary system is an importantfactor to currency crisis. Comparing the relation of the international monetary system andcurrency crisis in every stage and taking advantage of the theory of Kenney theory, the paperthinks the current international monetary system is lopsided, which represents the global tradesystem imbalance and the imbalance of right and obligation among central-peripheral nations.Therefore the international monetary system must be reformed.It is a new problem to estimate whether the actual exchange rate misaligns or not by theequilibrium exchange rate theory which led to the currency crisis under the currencyinternational monetary system. By analyzing the lira, Mexico piaster, baht and Japanese yen, the paper thinks all the currencies existed misalignment before the currency crises happened.Exchange rate misalignment is the main cause of currency crisis. The fundamental causeis the economy imbalance. The paper analyzes the relation between the economy balance andcurrency crisis by economy balance theory and cobweb theory under the open economy.Result shows currency crisis is decided by the integrated affect among the amelioration of theactual exchange rate to currency item, the wealth effect and the price effect.In order to defend currency crisis, the international monetary system must be reformed.Meanwhile, the economy imbalance should be adjusted. But under the current internationalmonetary system, in order to defend the national economy against foreign impact, as fasteningto adjust the economy imbalance, opening the capital market should be carried on discreetly.Under the current international monetary system, this paper analyses the relationshipbetween the economy and currency crisis in China. Meanwhile, in order to defend thecurrency crisis happening in China, this paper raises a series of advice and measures.