Using the Open Economic Monetary model, analyze the impact on the exchange rate on inflation and...

Using the Open Economic Monetary model, analyze the impact on the exchange rate on inflation and economic growth in the short and long term, if the Central Bank does not take any policy response? (case: the impact of COVID-19 on global financial market panic)

Expert Solution

inflation do impact currency exchange rate however is one among other factor.Currency exchange rate is product of strength of any economy. It can impact trade,growth,inflation etc. Currency exchange rate is determined by market forces of supply and demand.However during high level of volatility central bank do intervene to control the market.

Rather than exchange rate purchasing power parity(PPP) comapares the capacity of different economy in general price level .If inflation equal in different economy then exchange rate do not change.

Asia,pacific seen drop in foreign exchange inflow in countries due to reduction in export earning, FDI,tourism remittances

COVID 19 has pushed global economy in reccession. IMF estimate of global economy growing at -3%in 2020.Developed economy (-6% growth rate ) has got hit harder than developing.Global central bank has injected $6trillion into financial market and reduced the interest rate near to zero

Rahul Sunny answered 2 years ago

Using the IS-LM-FE model for a small open economy, analyze the effects of a contractionary monetary...

Using the IS-LM-FE model for a small open economy, analyze the effects of a contractionary monetary policy on output and the real interest rate in the short run and the long run. In each case, discuss the differences between the classical and the Keynesian models.

In a monetary model with floating exchange rates, what will happen to exchange rate, if the...

In a monetary model with floating exchange rates, what will happen to exchange rate, if the Central Bank of Turkey has decided to increase money supply? Discuss.

1. In a monetary model with floating exchange rates, what will happen to exchange rate, if...

1. In a monetary model with floating exchange rates, what will happen to exchange rate, if the Central Bank of Turkey has decided to increase money supply? Discuss

Explain the monetary model of exchange rate, with reference to PPP and the quantity theory of...

Explain the monetary model of exchange rate, with reference to PPP and the quantity theory of money

. Discuss the impact of higher economic growth on the exchange rate of the Canadian dollar...

. Discuss the impact of higher economic growth on the exchange rate of the Canadian dollar according to the monetary approach to the exchange rate model. Why does the model makes this prediction? The Keynesian approach to the exchange rate model. Why does the model makes this prediction?

state the equation of exchange rate of the monetary approach to the exchange rate

analyze the effect of an expansionary monetary policy under perfect capital mobility and fixed exchange rate...

analyze the effect of an expansionary monetary policy under perfect capital mobility and fixed exchange rate regime on an economy

Suppose that a monetary model describes the long-run behavior of the nominal exchange rate well, but...

Suppose that a monetary model describes the long-run behavior of the nominal exchange rate well, but fails to describe the short-run behavior; specifically, in the short run large deviations from purchasing power parity are observed due to nominal rigidities in goods’ prices and overshooting of the nominal exchange rate in response to monetary shocks occurs as a result. a) What are the three key modeling assumptions used to derive the monetary model of exchange rates? What is the only one...

You are the chief economic adviser in a small open economy with a floating-exchange-rate system. The...

You are the chief economic adviser in a small open economy with a floating-exchange-rate system. The country wishes to decrease the trade imbalance while increases the level of output in the short run. Do you recommend using expansionary or contractionary monetary or fiscal policy? And, Use the Mundell–Fleming model to illustrate your proposed policy graphically. What is the impact of policy on exchange rate? Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv....

Using the long run model of a small open economy to graph the impact of reducing...

Using the long run model of a small open economy to graph the impact of reducing the government budget deficit (T up or G down) on the us exchange rate and trade balance. Draw corresponding diagrams for the market of loanable funds and foreign currency exchange market. Please label axes, curves, equilibrium values, curve shift direction. Based on the graph, explain why Camdessus' policy is useful here. What happens to the exchange and trade balance because of the government budget...

Question