In the short run of a model with sticky prices, a reduction in the money supply raises
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In the short run of a model with sticky prices, a reduction in the money supply raises the nominal interest rate and appreciates the currency (see Chapter 14). What happens to the expected real interest rate? Explain why the subsequent path of the real exchange rate satisfies the real interest parity condition.
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Related Book For
International Economics Theory & Policy
ISBN: 9780138002121
8th Edition
Authors: Paul R Krugman, Maurice Obstfeld
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