ECON 314 Lecture Notes - Lecture 17: Floating Exchange Rate, Currency Crisis, Foreign Exchange Controls
24 Jun 2019
School
Department
Course
Professor
Document Summary
> practice midterm will be given out on friday, february 17. Small calculation qs based on models covered in class. Because of export promotion and import substitution pursued by mane developing countries, their currencies ate over over-valued. This can lead to currency crisis - esp. from 1990-1995 in asia. Developing countries have a few options available in terms of managing the fluctuations of their currency. They can curtail excess demand through taxes, tariffs, dual exchange rates. An increase in the domestic price level - goods will become more expensive & depreciation of domestic currency. A reduction in the export price of a major commodity of a country - reduction in the value in the domestic currency if the increase in demand for the major commodity isn"t enough to offset the lower price. An increase in the demand of the goods of a country - the value of the domestic currency will increase.
