Instruction:

Suppose that, as a financial analyst, you are tasked with evaluating Blades, a U.S. manufacturer of

roller blades. In the assignment, you provide the chief financial officer (CFO) of Blades a better

understanding of the process of government intervention and its impact on Blades’ international

business. The company generates most of its revenue and incurs most of its expenses in the United

States. However, it has recently begun exporting roller blades to Thailand. You will provide a

report that includes your assessment of the Thai government intervention and its impact on the

exchange rate of baht. You are asked to analyze the following issues and provide solutions to

Blades.

 Discuss whether the intervention effort by the Thai government constitute direct or indirect

intervention.

 Discuss whether the intervention by the Thai government constitute sterilized or nonsterilized

intervention and the difference between the types of intervention.

 Which type of government intervention (sterilized vs. nonsterilized) do you think would be

more effective in increasing the value of the baht? Once you choose one of the types, justify

your answer.

 If the Thai baht is virtually fixed with respect to the dollar, what would happen to the U.S.

levels of inflation?

 What are some of the potential disadvantages for Thai levels of inflation associated with the

floating exchange rate system that is now used in Thailand?

 What do you think will happen to the Thai baht’s value when the swap arrangement is reversed

later?

 Do you have any other suggestions to Mr. Holt with regard to Blades’ business in this

circumstance?