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Q. Illustrate why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at least some monetary independence.
Answer: Any independent money supply vary in Norway would put pressure on krone interest rates and therefore on the krone/euro exchange rate. Therefore by pegging the krone even to a single foreign currency Norway completely surrenders its domestic monetary control.
Although the elegance and comprehensiveness of transactions costs reasoning has provided the internalisation approach with a powerful logic (Rugman, 1981, 1985), it is still defici
describe this thery in detail?
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Q. What are the three main reasons why governments sometimes chose to devalue their currencies? Answer: 1. Permit the government to fight domestic unemployment despite the
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