Explain why a consensus has developed that countries should either allow their exchange rates to float freely or adopt a hard peg as an exchange-rate regime?
Answer to relevant QuestionsExplain the costs and benefits of dollarization. Could a dollarized regime collapse? China’s stock of foreign-exchange reserves has risen more than 20 times since 2000, and approached $3.5 trillion in the spring of 2013. Do you think that pace of reserve accumulation is likely to continue? Why or why not?Assuming the country is open to international capital flows, which of the following combinations of monetary and exchange-rate policies are viable? Explain your reasoning.(a) A domestic interest rate as a policy instrument ...If velocity were predictable but not constant, would a monetary policy that fixed the growth rate of money work? Why is inflation higher than money growth in high inflation countries and lower than money growth in low inflation countries?
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