| Summary: | BELL, Graham Douglas, M.Com. University of the Witwatersrand, 1985.
This dissertation studies the development and operation, advantages and
problems associated with the Eurocurrency market. It also considers the
parallel emergence of the United States dollar as the primary
international vehicle currency. A well-developed international money
market with easy access to a widely accepted international numeric is
deemed desirable because it reduces the costs of international financial
transactions and facilitates international capital mobility. Two major
criticisms are that the Eurocurrency market contributes to international
inflation and that Euro banks have been imprudent in lending to developing
countries. The thesis concludes that the conventional credit multiplier
model is not appropriate in studying the market but that there is,
however, some inflationary potential. As for imprudent Euro bank lending,
some blame adheres to the bankers but extensive international controls
are ruled out. Finally, the advent of floating exchange rates in the
1970s and uncertainty surrounding United States economic policy has led
to considerable uncertainty in international financial markets. This has
been aggravated by volatile short-term international capital flows
fuelled by the efficient Eurocurrency market. In such an environment
South Africa has experienced considerable oscillations in the price of
gold, its major export, and has embarked on a programme to establish a
flexible foreign exchange market. Much progress has been made but
important changes, particularly in the forward market, are vital.
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