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Derive and explain the elasticity approach

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To correct a Balance of payments (BOP) deficit, the Central Bank could depreciate or devalue the currency. Derive and explain the elasticity approach / conditions to BOP adjustment when there is a deficit.

In a fixed exchange rate regime, the Central Bank can pursue a sterilized intervention or unsterilized intervention. Show how a sterilized intervention, when the domestic currency appreciates, will be carried out by the Central Bank

Reference no: EM132506967

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