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Regional Monetary Arrangements
Regional Monetary Arrangements

... adjustment within an economy that has been hit by external shocks, usually takes time if nominal rigidities exist. The absence of labor mobility across borders rules out another adjustment mechanism. Thus, a flexible exchange rate would be the only automatic shock absorber that the country may rely ...
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ECON 58 - Department of Economics
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... finance minister made a remarkable official statement in which he announced that monetary policy would from then on be aimed at stabilizing the internal price level. Because of Sweden’s subsequent excellent economic performance, the alleged adoption of price-level targeting has since been repeatedl ...
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The Impact of Global Financial Crisis on RMB Internationalization
The Impact of Global Financial Crisis on RMB Internationalization

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Mr. Mayer AP Macroeconomics
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Currency Politics: The Political Economy of Exchange Rate Policy

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probset - Solution Manual

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Regional Symposium: Policies and Environment Conducive to

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This PDF is a selection from an out-of-print volume from... of Economic Research Volume Title: NBER Macroeconomics Annual 1986, Volume 1
This PDF is a selection from an out-of-print volume from... of Economic Research Volume Title: NBER Macroeconomics Annual 1986, Volume 1

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Term paper for the course `Comparative macroeconomic policy`
Term paper for the course `Comparative macroeconomic policy`

... the rates were allowed to fall back after the immediate pressures had subsided. This kind of wavering monetary policy leads to high dependence on heavy intervention. Financial response to crisis included official liquidity assistance in the form of IMF standby credits and substantial additional mult ...
Econ 4401 – International Economics – Spring 2014 Homework #3
Econ 4401 – International Economics – Spring 2014 Homework #3

... However, on the euros you borrow, according to our data, you owe 3%; you can take your loan, convert it today in dollars at the spot rate (each Euro buys you $1.4) and invest at 4%. You are bringing home a positive interest rate differential (4% - 3%) and with the forward contract, you have secured ...
Do Professional Currency Managers Beat the Benchmark
Do Professional Currency Managers Beat the Benchmark

Full Text
Full Text

... increase in money supply does not necessarily mean an increase in economic output. He also stated that the exchange rate is determined by the money supply available on the market and that, the surplus of the money supply brings a depreciation of the currency. Later, Fisher brought in discussion the ...
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Fixed exchange-rate system

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime where a currency's value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold. There are benefits and risks to using a fixed exchange rate. A fixed exchange rate is usually used in order to stabilize the value of a currency by directly fixing its value in a predetermined ratio to a different, more stable or more internationally prevalent currency (or currencies), to which the value is pegged. In doing so, the exchange rate between the currency and its peg does not change based on market conditions, the way floating currencies will do. This makes trade and investments between the two currency areas easier and more predictable, and is especially useful for small economies in which external trade forms a large part of their GDP.A fixed exchange-rate system can also be used as a means to control the behavior of a currency, such as by limiting rates of inflation. However, in doing so, the pegged currency is then controlled by its reference value. As such, when the reference value rises or falls, it then follows that the value(s) of any currencies pegged to it will also rise and fall in relation to other currencies and commodities with which the pegged currency can be traded. In other words, a pegged currency is dependent on its reference value to dictate how its current worth is defined at any given time. In addition, according to the Mundell–Fleming model, with perfect capital mobility, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.In a fixed exchange-rate system, a country’s central bank typically uses an open market mechanism and is committed at all times to buy and/or sell its currency at a fixed price in order to maintain its pegged ratio and, hence, the stable value of its currency in relation to the reference to which it is pegged. The central bank provides the assets and/or the foreign currency or currencies which are needed in order to finance any payments imbalances.In the 21st century, the currencies associated with large economies typically do not fix or peg exchange rates to other currencies. The last large economy to use a fixed exchange rate system was the People's Republic of China which, in July 2005, adopted a slightly more flexible exchange rate system called a managed exchange rate. The European Exchange Rate Mechanism is also used on a temporary basis to establish a final conversion rate against the Euro (€) from the local currencies of countries joining the Eurozone.
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