Why under fixed exchange rate is ineffective, International Economics

Assignment Help:

Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output.

Answer:  In floating by purchasing domestic assets the central bank cause an initial excess supply of domestic money that concurrently pushed the domestic interest rate downward and weakens the currency.  Though under fixed exchange rate the central bank will oppose any tendency of the currency to depreciate by selling foreign assets for domestic money and consequently removing the initial excess supply of money its policy move has caused.


Related Discussions:- Why under fixed exchange rate is ineffective

Substantial current account deficit, Q. What are the reasons for the world ...

Q. What are the reasons for the world as a whole running a substantial current account deficit? Answer: This deficit improved sharply in the early 1980s and has remained high.

Treflers case of missing trade, Q. The Heckscher-Ohlin model is famous for ...

Q. The Heckscher-Ohlin model is famous for being elegant and mathematically sophisticated, yet failing to define reality. One manifestation of this fact is Trefler's Case of Missi

Strategies of globalization and regionalization, Describe the strategies of...

Describe the strategies of globalization and regionalization and explain when each strategy can be used effectively.  Give examples of successful companies that have followed each

Risk of financial crisis, Q. Discuss the role of more "transparency" ...

Q. Discuss the role of more "transparency" in reducing the risk of financial crisis. Answer: Must discuss the Asian crisis where foreign banks lent money to Asian enter

Trade barriers, why do nations impose trade barriers

why do nations impose trade barriers

Evaluate the argentinean convertibility law, Q. Evaluate the Argentin...

Q. Evaluate the Argentinean Convertibility Law of April, 1991. Answer: Excellent idea in the short run disastrous idea in the long run. The law was discarded only in Ja

Resarch paper, i need to do term paper international economics related. the...

i need to do term paper international economics related. the paper have to be empirical paper. Writing an Empirical Paper in APA Style 1- Title Page 2- Abstract 3- Introduction 4-

Balance of trade, Explain the complexities in the annalysis of balance of p...

Explain the complexities in the annalysis of balance of payment equilibrium

Explain theoretical and methodological aspects , Explain Theoretical and me...

Explain Theoretical and methodological aspects of international economic relations

Developing country crisis, Q. What are the main lessons economists le...

Q. What are the main lessons economists learned from the developing country crisis? Answer: 1. select the right exchange rate regime. 2. The central significance of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd