Author : Charles Engel
Release : 2010-08
Genre : Business & Economics
Kind : eBook
Book Rating : 117/5 ( reviews)
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Book Synopsis Exchange Rate Policies by : Charles Engel
Download or read book Exchange Rate Policies written by Charles Engel. This book was released on 2010-08. Available in PDF, EPUB and Kindle. Book excerpt: Modern macroeconomic theory teaches us new lessons about exchange rates: Currency depreciations or appreciations that change the relative competitiveness of producers in different countries are undesirable from a global perspective if they lead to relative prices that do not reflect the true relative costs of production. ¿External balance¿ does not mean that trade balances should be zero, but rather that global resources are allocated efficiently. The implications of this insight for the role of the exchange rate in monetary policy are explored here. Some of the traditional arguments for purely floating exchange rates are challenged by this approach. Also briefly considers sterilized intervention and comments on the role of international reserves.