Nama : TIARA PUTRI AFRICHIA

Nim : 042834696

Tugas 1 Bahasa Inggris Niaga ( ADBI4201 )

What happens if a country does not have a central bank, namely the absence of research or
monitoring, the central bank can monitor the vulnerability of the financial sector and detect
potential shocks that have an impact on financial system stability. Through research, Bank
Indonesia can develop macroprudential instruments and indicators to detect financial sector
vulnerabilities. The results of the research and monitoring will then become recommendations for
the relevant authorities in taking appropriate steps to reduce disruptions in the financial sector.

If there is no central bank, the stability of currency values, stability of the banking sector, and the
financial system as a whole will decline and become unstable.
Because the central bank is an institution that is responsible for maintaining price stability or the
value of a currency prevailing in the country, which in this case is known as inflation or rising
prices, which in other words means a decrease in the value of money.

And if there is no central bank, failure in the sector of healthy financial institution performance
can lead to financial instability and disrupt the economy. To prevent such failure, an effective
banking supervision and policy system must be enforced. In addition, market discipline through
authority in supervision and policy makers as well as law enforcement must be implemented.
Available evidence shows that countries that apply market discipline have strong financial system
stability. Meanwhile, law enforcement efforts are intended to protect banks and stakeholders and
at the same time encourage confidence in the financial system. To create stability in the banking
sector in a sustainable manner, Bank Indonesia has developed the Indonesian Banking
Architecture and the implementation plan for Basel II.

A floating exchange rate which refers to an exchange rate system in which supply-demand in the
foreign exchange market (forex) determines the price of a country's currency. The government
does not intervene at all in the market to influence the exchange rate of the domestic currency.
Free floating exchange rates are sometimes referred to as clean or flexible floating rates. Its free
movement allows the exchange rate to adjust and correct imbalances, such as the current account
deficit.

In floating exchange rates, currency values continue to fluctuate according to the basics of supply
and demand. Even a small speculative behavior also contributes to the fluctuation.
A floating exchange rate is the opposite of a fixed exchange rate. In this regime, the exchange
rate is not left to the market mechanism; instead, the government determines it. The fixed
exchange rate system requires active intervention from the government, which is done by buying
and selling currencies in the forex market.

A floating exchange rate system means long-term changes in currency prices reflecting the
relative economic strength and differences in interest rates between countries. A currency that is
too low or too high can negatively affect a country's economy, affecting a country's trade and
debt serviceability.

So floating exchange rates provide uncertainty to international trade.

Thank you

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