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Monetary Policy (ER) - Coggle Diagram
Monetary Policy (ER)
Limitations
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Relative exchange rates
If all other countries depreciating, no use
Types of...
Exchange Rates
Nominal (The flat amount, change in this directly affects)
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Exchange Rate Systems
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Managed/ Dirty ERS (Float within a stipulated band, if it goes out, govt intervene)
Determinants of ER
Demand for Currency
Demand Exports for G&S
Relative inflation rates (which has higher inflation, if SG has higher inflation, less willing, depreciates)
Structural Changes (R&D and lower COP makes SG dollar have more demand, appreciation of currency)
Long term capital flows
Investment Prospects (Increase in Long term increase demand, appreciates)
Short term capital flows
Relative interest rates (Markets with highest interest rates, maximise returns appreciates)
Speculation (expect money to appreciate, will buy)
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Supply of Currency
Demand Imports for G&S
Foreign G&S cheaper due to high inflation, buy more goods, need sell local currency, increase supply, depreciates
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