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A government wants to fix its exchange rate, but it does not want to lock up its money supply. Instead, it imposes a per
Posted: Sun Jun 05, 2022 3:45 pm
by answerhappygod
- A Government Wants To Fix Its Exchange Rate But It Does Not Want To Lock Up Its Money Supply Instead It Imposes A Per 1 (25.81 KiB) Viewed 54 times
A government wants to fix its exchange rate, but it does not want to lock up its money supply. Instead, it imposes a per-unit cost of exchanging currency c, so that after converting 1 unit of domestic currency to 1/ED/F units of foreign currency, a cost of c has to be paid. There is no cost of converting foreign currency back to domestic currency. Modify the exact version of the uncovered interest rate parity to suit this situation.