Harvard case: Laura Alfaro and Rafael Di Tella, “The U.S. Current Account Deficit,” Harvard Business School case: XXXXXXXXXX, revised Oct. 2019. Objective: Study the drivers of the U.S. current...

Running Head: INTERNATIONAL FINANCIAL MANAGEMENT     1
INTERNATIONAL FINANCIAL MANAGEMENT     10
INTERNATIONAL FINANCIAL MANAGEMENT
Executive Summary
The value for a dollar can be determined based on its demand. It is like the demand for goods and services. The current study explores the different ways, by which the value of USD can be measured. Based on the exchange rate, supply as well as demand the dollar value can be determined. The study also explores the rate, at which the dollar value can fluctuate and whether it will affect the investment of other countries on the trades with America. The consistent decline I the value of the dollar in between the year 2000 and 22011 had been evident in the rate of Fed funds as well as a high increase in the federal debt. The study explores whether the policies, which are set by the Federal Reserve impacts on the dollar value. The personal reflection includes what the researcher understand can be a future impact on the declination of the dollar value.
Table of Contents
Executive Summary    2
Introduction    4
Determining the Value of Dollar and its Historical Movement against Other Major Currencies in the World    4
Impact of Current Account Balance on Value of Dollar    4
Impact of Federal Monetary Policies on Value of Dollar    5
My View on the Long-Term Value of Dollar    6
My Investment in the Context of the Future of U.S. Dollar    7
Conclusion    8
References    9
Introduction
The performance of the economy plays an important role in buying or selling power of dollars. Stronger is the economy, higher will be its ability to attract investment globally. This is because of the perceived safety and rate of return for investments. The forex value of the dollar also affects the interest rates in central banks as well as the debt levels of the country. There are several monetary tools that help in the determination of the value of the dollar.
This also emphasizes how the federal government regulates the exchange rate of the dollar. In 1913, the value of dollar much more compared to the value by the year 2019. A dollar in the year 1930 could have bought the same products as of today's $15.46 (Alfaro, Tella & Jeong, 2020). This reflects that the value of the dollar has been slowly sliding with time.
Determining the Value of Dollar and its Historical Movement against Other Major Currencies in the World
Impact of Current Account Balance on Value of Dollar
The movement in the exchange rate and the volatility in the value of the dollar largely depends on the implication of Balance of Payments also known as a BOP. As per Gong (2017), the BOP is defined as the summary statement for any country’s transaction with other parts of the world in terms of services, goods, payments, receipts and transfer of currencies. The financial and capital account helps in recording the sales and purchases of financial assets. This flow in the financial and capital account results in maintaining the BOP in the balanced condition.
Further, in case of deficits in the current account, there needs to be an equivalent flow of finance. According to Ousseini, Hu and Aboubacar (2017), the external balance can be attained in the case the current account and the financial as well as the capital account offset one another. Hence, this ensures that there is neither a deficit nor a surplus in a BOP. In certain situations, if there any deviations arise, the external imbalances will result in triggering adjustments with the movement in exchange rates so that the balance can be restored.
The current account either may be a deficit or can be surplus. This rise in the surplus occurs when the value of goods and services exported by the country increases. This also includes an increase in the receipt in the factor incomes as well as...