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Under which exchange rate regime would you expect the gains from international asset trade to be greater, fixed or floating?
Why might covered interest parity fail to hold when deposits issued in different financial centers are compared?
When a U.S. bank accepts a deposit from one of its foreign branches, or from its own IBF. What do you think is the rationale for these regulations?
Why might growing securitization make it harder for bank supervisors to keep track of risks to the financial system?
How would the domestic nominal interest rate be related to the foreign nominal interest rate? What if the crawling peg is not fully credible?
How might a developing country's decision to reduce trade restrictions such as import tariffs affect its ability to borrow in the world capital market?
How might an IDCC have facilitated debt relief for developing countries? What problems can you see in operating such a facility?
Why would Argentina have to give the United States seigniorage? How would you measure the size of Argentina's sacrifice of seigniorage?
What might explain this seemingly strange pattern of prices and consumption levels?
Explain how you would figure out the dollar/pound exchange rate implied by PPP. When might it be a bad idea to use the PPP theory in this way?
The Federal Reserve announces how quickly the money supply grew in the week ending ten days previously.
Continuing with the preceding problem, discuss how the transfer would affect the long-run nominal exchange rate between the two currencies.
How does its action change the long-run real exchange rate between home and foreign currency? How is the longrun nominal exchange rate affected?
Explain how the nominal dollar/euro exchange rate would be affected by permanent changes in the expected rate of real depreciation of the dollar against euro.
Discuss what happens to the expected real interest rate? Explain why the subsequent path of the real exchange rate satisfies the real interest parity condition.
Use the DD-AA model to analyze the effects this measure would have on the economy. Analyze both temporary and permanent tariffs.
Why does the constitutional amendment imply that the government can no longer use fiscal policy to affect employment and output?
Suppose there is a permanent fall in private aggregate demand for a country's output. What government policy response would you recommend?
How does a permanent cut in taxes affect the current account? What about a permanent increase in government spending?
If a government initially has a balanced budget but then cuts taxes. Why would you still expect the tax cut to cause a currency appreciation?
What other macroeconomic change might bring about a currency depreciation coupled with a deterioration of the current account, even if there is no J-curve?
How would you draw the DD-AA diagram when the current account's response to exchange rate changes follows a J-curve?
What does the Marshall-Lerner condition look like if the country whose real exchange rate changes does not start out with a current account of zero?
Suppose that interest parity does not hold exactly, but that the true relationship. Evaluate the policy's output effects in this situation.
How are the central bank's transactions in the foreign exchange market reflected in the balance of payments accounts?