Suppose that some central banks sell large amounts of their reserves in U.S. dollars on the foreign

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Suppose that some central banks sell large amounts of their reserves in U.S. dollars on the foreign exchange market to buy an equivalent amount of Euro. Is this action equivalent to a sterilized sale of U.S. dollars in the foreign exchange market?

What might be the effects on the European Central Bank? Explain your assumption about perfect versus imperfect asset substitutability.

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International Economics Theory And Policy

ISBN: 9781292409719

12th Edition

Authors: Paul Krugman , Maurice Obstfeld, Marc Melitz

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Question Posted: Feb 27, 2024 03:04 AM

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Suppose that some central banks sell large amounts of their reserves in U.S. dollars on the foreign

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A sale of US dollars by central banks on the foreign exchange market with the proceeds used to buy an equivalent amount of Euro is not equivalent to a ...View the full answer

International Economics Theory And Policy

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