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Subject: regulation of rate of exchange econ. Переведите пожалуйстаThat leads us to the idea that a fixed exchange rate is more effective for developing economies where external trade forms a large part of their GDP because it stabilizes the value of a currency, vis-a-vis the currency it is pegged to. This facilitates trade and investments between the two countries, (in what way?) It is also used as a means to control inflation, (how?) In addition, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability, (how?) In certain situations, fixed exchange rates may be preferable for their greater stability. For example, the Asian financial crisis was improved by the fixed exchange rate of the Chinese renminbi, and the IMF and the World Bank now acknowledge that Malaysia's adoption of a peg to the US dollar in the aftermath of the same crisis was highly successful. If economic policy is based on the "anchor" of a currency peg, monetary policy must be subordinated to the needs of maintaining the peg. As a result the burden of adjustment to shocks falls largely on fiscal policy (government spending and tax policies). For a peg to last, it must be credible. In practice, this often means that fiscal policy must be flexible enough to respond to shocks. Under a more flexible arrangement, monetary policy may be more independent but inflation can be somewhat higher and more variable. |
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