Predictor of the spot exchange rate

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(a) Comment on this statement: "There is no need to worry about having a fiscal deficit, since it can be resolved by asking the central bank to print more money."

(b) Describe the economic condition under which the forward exchange rate becomes a downwardly biased predictor of the spot exchange rate to be realized in the future. Explain the governing equilibrium condition.

Reference no: EM133074312

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