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International Economics Essay:Fixed Exchange rates

Explain how a monetary authority maintains a fixed exchange rate and how government macroeconomic policies might conflict with its ability to do so. Do you think this conflict provides a satisfactory explanation for the numerous currency crises that have occurred in the last 20 years? Justify your answer

language english
wordcount 2431 (cca 6.5 pages)
contextual quality N/A
language level N/A
price free
sources 3
Table of contents

Page 1-Fixed exchange rates

page 2-3-Changes in policy under fixed exchange rate

page 4-6-Currency Crises

Preview of the essay: International Economics Essay:Fixed Exchange rates

In order to answer this question I will first explain what a fixed exchange rate implies, how the central bank maintains a fixed exchange rate and the overall effects of this. I will then proceed to look at the effects of different macroeconomic policies on a fixed exchange rate. Following this I shall describe two contrasting models of currency crisis and explain the roles of the government and speculation in each of these models. Finally I shall identify whether it is the conflict ...

... conflict between maintaining a fixed exchange rate and government macroeconomic policies can provide some explanation for the crises that have occurred recently but do not provide a comprehensive reason for why a crisis occurs in all cases. There is also a self fulfilling element in cases where speculation plays a big part such as with the UK’S ERM crisis in 1992. Overall it appears that currency crises are inevitable and foreign exchange operators are important in the timing of the crisis.
Essay is in categories


Capital Markets & Exchanges


Princess R.

The monetary authority of the State is so vast as to restrict or liberalize monetary policies. This essay presents a good analysis of the case at hand.

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