ECON-206: History of Money and the Global Economy Report

This report delves into the history of money and its significant influence on the global economy, focusing on the role of currency trading. The analysis begins with an examination of economic factors that shape the Foreign Exchange (Forex) market, highlighting their impact on currency values. It then explores the relationship between international trade levels and currency values, demonstrating how demand for goods and services affects exchange rates. The report further investigates the positive contributions of currency trading to the global economy, including its effects on capital flows, international trade, and globalization. The conclusion emphasizes the long-term implications of currency value changes, positioning them as reflections of a nation's economic health. The report utilizes multiple sources to support its arguments and provides a comprehensive understanding of the complex relationship between currency trading and the global economy.

Running Head: HISTORY OF MONEY
HISTORY OF MONEY
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Economic Factors Affecting Forex Market............................................................................2
Level of Trade between the Nations......................................................................................3
Positive Role in Global Economy..........................................................................................3
Conclusion..................................................................................................................................4
Reference....................................................................................................................................6

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Introduction
International trades are impacted directly by the exchange rates. Boosting of the
exports can have the salutary effect on the GDP of the country. The currencies that are
exceptionally strong can be dragged on the economy that can result in the higher interest rates
as well as it shifts in the monetary policy for decreasing the currency value for spur the
growth. Apart from inflation as well as interest rates, the most important factor for the
relative level of country’s economic health. The currency exchange rate helps in playing
important role in the trade level of the country that is critical for most of the free market
economy of the world. Hence, the aim of this assignment is to do the analysis on the how
trading of currency plays positive role in the global economy. Under this assignment,
discussion will be done on the economic factors that affect forex market, levels of trade
between the nations and positive role played by the currency trading in the global economy
(Bussière, Delle Chiaie & Peltonen, 2014).
Discussion
Economic Factors Affecting Forex Market
Forex is considered as the true global marketplace, which is having the buyers and
sellers from every corners of globe that participates every day in trillions of dollars. It is
because of the much greater role played by the macroeconomic events, trading of the foreign
exchange has become globalized activity. The forex markets are driven primarily by the
macroeconomic factors (Lai & Yu, 2015). Trader’s decisions are affected by these factors
and it ultimately determines currency value at any point of time. One of the key factor in the
value of the nation’s currency is the economic health of the national economy. The overall
health of the economy are shaped by the number of events as well as number of the events

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that are changed on daily basis, which contributes towards 24/7 nature of international
foreign exchange market (Campanella, 2016).
Level of Trade between the Nations
The second important factors that are played by the currency in the global economy
are levels of balance of trade as well as trends between the nations. The levels of the trade
between the nations serve as the proxy for relativeness of demand of the goods from the
nation. The nation that has internationally high demand for their goods and services typically
sees appreciation of their currency such as for purchasing goods from Australia, the buyers
have to convert their currency into the Australian dollars in order to make purchases. Hence,
if there would be increased demand for Australian dollar then automatically it will put
upward pressure on the Australian currency value (Varoufakis, 2015).
Moreover, the impacts of the foreign currency trading has the wider magnitude, it is
because the impact of the currency trading is wider throughout the world. Several factors
affect currency trading such as output level and real exchange rates. In case of devaluation of
currency or depreciation of the prices of imports increases in comparison with the exports
prices, which results in improving trade balance and hence it improves positive relationship
with foreign sector of the economy (Prasad, 2017).
Positive Role in Global Economy
Foreign exchange helps in identifying the process of converting the currency into the
international banknotes at the particular exchange rates. These transactions present distinct
ramifications for globalized economy. The rate of foreign exchange affect the capital flows,
international trade as well as political sentiments. Foreign exchange rates influences the
investment funds or the capital flows, which moves into as well as out of the country. As a
result of which, the foreigners liquidates the bonds, stocks and the real estate, because these

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are the assets, which losses the purchasing power that are relative to the competing
investments in the other countries and currencies. The international savers prefers for
purchasing the investments in the countries, which features stable as well as exchange rates
that are appreciating. Generally, foreigners are much more comfortable in making the
overseas financial commitment in case they feel that the value to be preserved, as the
international profits are converted eventually back into the home currency (Pomeranz &
Topik, 2014).
The orderly dispersal of the exchange rates by the organized currency market helps
for leading to the increased globalization. In general, globalization is referred as the
integration of the separate nations, culture as well as regions within the economy of world.
These trends help in improving the spread of the technological innovations, expanding the
market as well as creating the jobs for the international labor pool. Globalization includes the
inflation because of the increased competition levels for the jobs as well as the market places
the downward the pressure on the prices (Gilpin, 2018).
Other important role played by the foreign currency in the global economy is exports,
which creates the jobs as well as boost the economic growth. It helps in giving more
experience to the domestic companies in order to produce for the foreign markets. Over the
time, in the global trade, companies gain the competitive advantages. International level helps
in making the companies more efficient (Kelsey, 2015).
Conclusion
Hence, it can be concluded from the analysis that the rising value of currency has
become important theme in the financial markets. The movements of the currency although,
have been always complicated in its causes as well as consequences. However, with the
increase in the value of the currency presents great challenges on both to the investors as well

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as country, it is because at this particular time, there appears to be the positive force in
globalized economy as well as in long-run for the global investors. Further, a change in the
value of the currency reflects the long-term changes in the economic prosperity of the nation
as compare to the short-term speculative movements. Therefore, it can be said through the
analysis that trading of currency plays positive role in the global economy.

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Reference
Bussière, M., Delle Chiaie, S., & Peltonen, T. A. (2014). Exchange rate pass-through in the
global economy: the role of emerging market economies. IMF Economic
Review, 62(1), 146-178.
Campanella, M. L. (2016). Is the euro ready to play the global currency role?. In The€ uro
and the Dollar in a Globalized Economy (pp. 103-122). Routledge.
Gilpin, R. (2018). The challenge of global capitalism: The world economy in the 21st
century. Princeton University Press.
Kelsey, J. (2015). Reclaiming the future: New Zealand and the global economy. Bridget
Williams Books.
Lai, E. L. C., & Yu, X. (2015). Invoicing currency in international trade: An empirical
investigation and some implications for the renminbi. The world economy, 38(1), 193-
229.
Pomeranz, K., & Topik, S. (2014). The world that trade created: Society, culture and the
world economy, 1400 to the present. Routledge.
Prasad, E. (2017). Gaining currency: The rise of the renminbi. Oxford University Press.
Varoufakis, Y. (2015). The global minotaur: America, Europe and the future of the global
economy. Zed Books Ltd..