Behavior of inevitably and exchange rates, International Economics

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Q. "Even under flexible exchange rate regime, governments should not be indifferent to the behavior of inevitably and exchange rates surrendered some of their policy autonomy in other areas to prevent exchange rate movements they viewed as harmful to their economies." Discuss.

Answer: It is true for an example is Volker in October 1979 decreasing the U.S money supply to halt additionally weakening of the dollar.


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