Lecture 6 - The IS LM Equilibrium in the Open Economy Flashcards
Some countries…
Peg their currency to the dollar.
Some countries operate under a…
Crawling peg by moving to an exchange rate target slowly.
The European Monetary System (EMS) determined the movements of exchange rates within the European Union from…
1978 to 1998.
In the EMS, member countries agreed to maintain their…
Exchange rate relative to the other currencies in the system within narrow limits or bands around a central parity, a given value for the exchange rate.
Beginning on 1st January 1999, a number of those European countries adopted a common currency…
The euro.
German reunification in 1990 led to…
Large increases in demand and interest rates in Germany.
To stay in the fixed exchange regime of the EMS, other European members had to…
Match German interest rates, leading to decreases in their output.
