In September 1992, a speculative attack compelled the United Kingdom to devalue the British pound versus the German currency (Deutsche Mark). How did monetary policy in both countries influence this outcome? Plot from 1990 to 1992 the discount rates in the United Kingdom (FRED code: INTDSRGBM193N) and Germany (FRED code: INTDSRDEM193N), and (on the right scale) the exchange rate of German marks per British pound (obtained by multiplying the number of U.S. dollars per pound (FRED code: EXUSUK) by the number of Deutsche Marks per U.S. dollar (FRED code: EXGEUS)). What do you conclude?

  • CreatedOctober 02, 2014
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