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Fixed Exchange Rates
In a regime of , how might a Central Bank operate its
monetary policy and its policy for intervention in foreign exchange
markets? Why does it need foreign exchange reserves?
The last 20 years have seen an increased international interdependence due
to the reduction in the controls on capital flows between countries have
been much reduced. Also, since the early 1970's, many countries have
permitted much more flexibility in their exchange rates. These
developments have raised several issues: how does the exchange rate regime
affect the efficacy of domestic monetary and fiscal policies undertaken by
small, open economies? ....
Word count: 1526 - Page count: 6
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