How can the exchange rate affect monetary stability

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Reference no: EM133401957

Questions:

1. How can the exchange rate affect monetary stability?
2. How can the exchange rate affect employment?
3. How can the exchange rate affect financial stability?
4. What are the types of exchange rate regime:- In a fixed exchange rate regime, can the central bank print money independently to stimulate the economy, regardless of the monetary conditions in the country with which does it peg its exchange rate? Why or why not
5. Why can a central bank choose a "rigid peg" exchange rate regime?
6. Why might a central bank choose to adopt a free exchange rate regime - what problems might there be in adopting such a system?
7. What does PPP mean? According to relative purchasing power parity, if inflation increases, what happens to the exchange rate? - Why can an exchange rate deviate from purchasing power parity in practice?
8. According to uncovered interest parity, what is the relationship between the interest rate difference between two countries and their respective exchange rates? What makes this theory difficult in practice?
9. According to the exchange rate portfolio balance models, why may the uncovered interest rate parity (UIP) not be maintained
10. According to the exchange rate portfolio balance models, how will the current account affect the exchange rate
11. Why can't the central bank aim to have an exchange rate target, free movement of capital and independent monetary policy at the same time?
If the Central Bank wants to reduce inflationary pressures, but at the same time maintain a competitive currency to stimulate exports, what consequences would it bring to the credibility of the Central Bank?
12. How is the equilibrium exchange rate defined? How useful is the concept of the equilibrium exchange rate? Please discuss using at least three examples.
13 What is foreign exchange management? What could be the reasons for the central bank to establish capital controls? 14. What could be the reasons for the central bank not to establish capital controls

Reference no: EM133401957

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