| Course | BUS 553 Global Corporate Finance |
|---|---|
| Module | Module 3 |
| Paper type | International monetary system analysis |
| Length | About 1,055 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for BUS 553 Module 3
Four Countries, Four Currency Regimes: The International Monetary System as an Oilfield Services Company Lives It
Student Name
MBA Program, Aspen University
BUS 553: Global Corporate Finance
Instructor Name
Month Day, Year
Four Countries, Four Currency Regimes: The International Monetary System as an Oilfield Services Company Lives It
Bayou Well Services, a composite company based in Houston, Texas, provides well testing, coiled tubing and maintenance services to oil and gas producers. It operates in the United States and in four other places: Saudi Arabia, Hong Kong, where it runs its Asian finance and procurement office, Brazil, where it serves offshore fields, and Germany, where it supports North Sea and industrial customers. Each of these operations earns and spends in a currency governed by a different exchange rate arrangement. This paper explains how the international monetary system came to look this way and what it means for Bayou's financial management.
From Gold to Floating Rates
Eichengreen (2019) traces the modern system through several stages. Under the classical gold standard before World War I, major currencies were convertible into gold at fixed rates, making exchange rates stable but tying each country's money supply to gold flows. The system broke down during and after the war, and attempts to restore it in the interwar years contributed to the spread of the Great Depression. After World War II, the Bretton Woods system fixed currencies to the dollar, which was convertible into gold for foreign governments, while allowing occasional adjustments and limiting capital flows. As capital mobility grew and the United States ran persistent deficits, the system came under strain and collapsed in the early 1970s. Since then, the major currencies have floated, while many smaller economies peg or manage their rates.
The Trilemma
Eichengreen (2019) explains the logic behind these shifts with what economists call the trilemma: a country cannot have a fixed exchange rate, free capital movements and an independent monetary policy at the same time. Under the gold standard and Bretton Woods, countries gave up one of the three: capital mobility was limited under Bretton Woods, for example. Today, the United States, Brazil and the euro area allow capital to move freely and use monetary policy for domestic goals, so they let their exchange rates float. Saudi Arabia and Hong Kong keep fixed rates and open capital accounts, so they give up independent monetary policy, largely following U.S. interest rates.
Regimes in Practice
Krugman et al. (2018) describe a spectrum of arrangements. Hard pegs and currency boards fix the rate firmly, managed floats allow movement with intervention, free floats leave the rate to the market, and currency unions replace national currencies with a shared one. Bayou's four markets span this range.
| Country | Arrangement | Main risk for Bayou |
|---|---|---|
| Saudi Arabia | Riyal pegged to the dollar at 3.75 since 1986 | Little day-to-day risk; small chance of a sudden change if oil prices collapse for years |
| Hong Kong | Currency board keeping the dollar between 7.75 and 7.85 per U.S. dollar | Very low movement; interest rates follow U.S. rates |
| Brazil | Floating real with occasional intervention | Large, frequent swings in the real against the dollar |
| Germany | Euro, a currency shared across the euro area | Euro moves against the dollar; policy set for the whole area |
Why Countries Share a Currency
Mundell (1961) asked when it makes sense for regions to share a currency. He argued that an optimum currency area is one in which shocks affect regions similarly or in which labor can move easily between regions, so that a common monetary policy suits all of them. If one region suffers a downturn while another booms, a shared currency removes the exchange rate as a tool for adjustment. The euro gives German businesses like Bayou's subsidiary the benefit of trading across much of Europe without currency risk, but it means monetary policy is set for the euro area as a whole, not for Germany's conditions.
When Pegs Break
History shows why a stable peg is not the same as no risk. When Britain left the European exchange rate mechanism in 1992, when several Asian currencies collapsed in 1997 and when Argentina abandoned its link to the dollar in 2002, companies that had treated fixed rates as permanent suffered large losses overnight. Pegs typically come under pressure when a country's reserves fall and markets doubt its willingness to keep raising interest rates to defend the rate. Saudi Arabia's large reserves and Hong Kong's fully backed currency board make sudden breaks unlikely, but Bayou's treasurer watches the signals that preceded past breaks, including falling reserves and rising forward premiums.
Reporting Across Regimes
The mixture of regimes also affects how Bayou reports results. Revenue earned in Brazil is translated into dollars at changing rates, so Brazilian growth can be hidden or exaggerated by currency moves. Bayou's managers therefore review Brazilian results both in reais and in dollars at a constant budget rate, separating operating performance from the effect of the exchange rate.
Managing Each Regime
Under Saudi Arabia's long-standing peg, Bayou treats riyal revenue much like dollar revenue for day-to-day purposes, but it monitors oil prices and reserve levels, since pegs can come under pressure in prolonged downturns, and it avoids holding large riyal balances for long periods. Hong Kong's currency board has operated through several crises, so Bayou uses the Hong Kong dollar freely for regional procurement. Brazil's floating real is Bayou's largest currency risk. Its Brazilian contracts are priced partly in dollars, it borrows locally in reais to fund equipment, matching assets and liabilities, and it hedges expected real-denominated profits for the next twelve months with forward contracts. In Germany, Bayou matches euro revenue with euro costs and hedges only the net amount it expects to send back to Houston.
What the System Means for Strategy
The system's mix of regimes means that currency risk is not uniform. A company operating across regimes needs different policies for different currencies, and it needs to watch for the rare but serious event in which a fixed rate breaks. For Bayou, the floating real demands active hedging, the pegs demand monitoring, and the euro demands attention to European conditions that may diverge from the company's other markets.
Conclusion
The international monetary system evolved from gold to fixed but adjustable rates to today's mixture of floats, pegs and currency unions, shaped by the trilemma that forces each country to give up one of three goals. Bayou Well Services experiences that mixture directly, and managing it well requires understanding why each regime exists and what kind of risk each creates.
References
Eichengreen, B. (2019). Globalizing capital: A history of the international monetary system (3rd ed.). Princeton University Press.
Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International economics: Theory and policy (11th ed.). Pearson.
Mundell, R. A. (1961). A theory of optimum currency areas. American Economic Review, 51(4), 657-665.
BUS 553 Module 3 instructions, in plain terms
Aspen's catalog for BUS 553 includes the international monetary system among its core topics, and the third paper traces how today's patchwork of currency regimes came about and what each regime means for a company. Check the classroom directions for what to emphasize; this example explains the system through one company's operations. Trace the main stages of the system's history briefly. Explain the main types of exchange rate regimes and how they work. Use theory to explain why countries choose different regimes. Show, with a real or composite company, how each regime creates different risks. Recommend management practices suited to each regime, distinguishing gradual movements from the risk of sudden breaks.
How this BUS 553 Module 3 example is built
The paper begins with Bayou Well Services and its operations in four countries. Eichengreen's Globalizing Capital traces the classical gold standard, the interwar breakdown, the Bretton Woods system of fixed but adjustable rates and the move to floating rates after 1973, and explains the trilemma. A section describes the main regimes: hard pegs, currency boards, managed and free floats and currency unions. A four-row table sets out Saudi Arabia's peg at 3.75 riyals per dollar, Hong Kong's currency board with a band of 7.75 to 7.85, Brazil's floating real and Germany's euro, with the main risk each poses. Mundell's American Economic Review article on optimum currency areas explains the euro's costs and benefits. Krugman, Obstfeld and Melitz's text supports the regime descriptions. Practices for each regime close the paper.
BUS 553 Module 3 rubric: what earns full marks
Papers on the monetary system are judged on accurate history, correct description of regimes, sound use of theory and clear links to business risk. This example keeps the history brief and accurate, attributing its account to Eichengreen's Globalizing Capital and explaining the trilemma that shapes every regime choice. Regime descriptions are specific, including the riyal's fixed rate and Hong Kong's band, so the grader can check them. Mundell's American Economic Review article grounds the discussion of currency unions, and Krugman, Obstfeld and Melitz's International Economics supports definitions. The table connects each regime to the risk it creates for a company, from gradual movement under a float to the sudden break that can end a peg, which turns economic history into practical risk management.
BUS 553 Module 3 help from the desk
Histories of the system tend to run long and stop before reaching anything a treasurer would use. Keep the history brief and focus on what it explains. Another is treating pegged currencies as risk free; pegs remove day-to-day movement but can break suddenly, which is a different kind of risk. Describe each regime precisely, with current facts and sources. Explain the trilemma, since it shows why countries cannot have fixed rates, free capital flows and independent monetary policy all at once. Use a company example to show how regimes differ in practice. Finally, recommend management practices that fit each regime rather than one policy for all currencies.
Write yours, or have the desk draft it
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BUS 553 Module 3 questions, answered
What does BUS 553 Module 3 usually ask for?
Aspen's BUS 553 covers the international monetary system in this module, so explaining how the system evolved and how exchange rate regimes affect companies is typical. Check your classroom prompt.
What was the Bretton Woods system?
The postwar system of fixed but adjustable exchange rates, with currencies pegged to the dollar and the dollar convertible to gold, which ended in the early 1970s.
What is the trilemma in international finance?
The idea that a country cannot simultaneously have a fixed exchange rate, free movement of capital and an independent monetary policy; it must give up one.
Where can I find a free BUS 553 Module 3 sample paper?
The full paper appears above: an oilfield services company operating under a peg, a currency board, a float and a currency union, with the system's history and a regime table.
What is a currency board?
An arrangement in which a monetary authority issues local currency only when backed by foreign reserves at a fixed rate, as in Hong Kong's link to the U.S. dollar.