Many Asian governments have attempted to promote their export competitiveness by holding down the value of their currencies through foreign exchange market intervention.
a. What is the likely impact of this policy on Asian foreign exchange reserves? On Asian inflation? On Asian export competitiveness? On Asian living standards?
b. Some Asian countries have attempted to sterilize their foreign exchange market intervention by selling bonds. What are the likely consequences of sterilization on interest rates? On exchange rates in the longer term? On export competitiveness?