Recall the Trilemma. Using that knowledge, explain why fixed
exchange rate regimes which have international capital mobility do
not have an independent monetary policy.
this question above .A country which adopts a fixed
exchange rate system with perfect capital mobility should implement
expansionary monetary policy to increase the aggregate income
level, Do you agree with this statement and why you agree..i want
explaination.
Exchange Rate Regimes. Be able to explain the types of exchange
rate regimes that a country could choose from. Discuss the
advantages and disadvantages of each (fixed vs. floating) and in
particular, discuss who benefits from (or loses in) each type of
system. Frame your discussion in terms of the “impossible trinity”
(aka “the Trilemma”); that is, be able to discuss how the choice of
exchange rate regimes relates to a country’s ability to conduct
independent monetary policy and allow...
suppose that a nation has perfect capital mobility and
a fixed exchange rate, a negatively sloped IS and positively sloped
LM curve. currently the economy is in recession. Should the nation
fiscal authority or its central bank take the lead in trying to
raise real income? Explain your answer.
Consider the case of a small open economy with a fixed exchange
rate, perfect capital mobility (i.e., interest parity holds), and
complete price stability (no ongoing inflation). Explain what
effect a decrease in the world interest rate would have on the
following domestic macroeconomic variables:
a. The stock of foreign exchange reserves. b. The money
supply.
c. Real GDP.
d. The price level.
e. The real exchange rate.
) What are fixed and floating exchange rate regimes? Discuss the
effect of adopting a fixed exchange rate regime on emerging market
economies. [10 marks]
Assume that you have fixed exchange rates and a SOE with perfect
capital mobility. Assume that you start from an external imbalance
(take the case that r in the internal equilibrium is higher than
what it should be). Describe the adjustment to external
equilibrium.
Suppose the domestic central bank maintains a fixed exchange
rate and free capital mobility. Assume that the foreign central
bank does not change its monetary policy, but the domestic central
bank expands credits to the domestic government. What kind of the
central bank’s interventions in the foreign exchange market are
necessary? Explain also their impacts on the central bank’s balance
sheet. Are these impacts the same as those of open market
operations? Explain your reasoning.