Ch 18 Flashcards
1
Q
Why study fixed exchange rates?
A
1) history
2) manage history
3) developing countries exchange rate volatility is very costly
4) regional arrangements
2
Q
How does a central bank fix its exchange rates?
A
On the balance sheet, unsterilized vs sterilized FX intervention (sterilized shields money market)
3
Q
Policy under fixed exchange rates
A
Monetary policy NOT effective (changes E-> if you try to change R then E changes w/ it)
Fiscal Policy much more effective
