By usion (30 points) important You reed to wite your won a parte piece of paper, take a picture of it and upload through the ink on Backboard See the Central Bank an emerging marts USC res to offer the temporary pressures in the foreign exchange market. Then wil ask you to reconocer a hypothetical randon in the market for state of this FX sale by the crank Hit The price on the articles should be the of USD as the local curryport) Dj Warty in your figure in part) Sports) Uhing the accounts of the central ter who w USD) and the commercial bar (who buys USO Hoe o tect of this transaction on wines and FX Moldes, you can read ove chat robeny weber artiester shot tomorrow on the balance (4 Bened on your answer in portray to the throne in the market for reserves Male sure you tabel your property to recoveredt ponta) Support this central bank want to refect of FX operation Graphical coordings in the foreve barons polet Based on your own partly expectations de by the centre points) Suppose the Central Bank in an emerging market sells its USD reserves to offset the temporary pressures in the foreign exchange market. This question will ask you to analyze the consequences of this action for a hypothetical transaction. a) In the market for FX reserves, illustrate the consequences of this FX sale by the central bank. Hint: The price on the vertical axis should be the value of USD against the local currency. (5 points) b) Verbally explain your figure in part (a) (5 points) c) Using the T-accounts of the central bank (who sells USD) and the commercial bank (who buys USD), illustrate the effects of this transaction on reserves and FX holdings. You don't need to give actual numbers. Simply state whether a particular balance sheet item goes "up" or "down" on the balance sheet. (4 points) d) Based on your answer in part (c), graphically illustrate the change in reserves, in the market for reserve balances. Make sure you label your axes properly to receive full credit. (6 points) e) Suppose that this central bank wants to sterilize the effect of FX operation. Graphically illustrate the corresponding action in the market for reserve balances. (5 points) f) Based on your answer in part (e), verbally explain the necessary action that is undertaken by the central bank. (5 points) 11:55 By usion (30 points) important You reed to wite your won a parte piece of paper, take a picture of it and upload through the ink on Backboard See the Central Bank an emerging marts USC res to offer the temporary pressures in the foreign exchange market. Then wil ask you to reconocer a hypothetical randon in the market for state of this FX sale by the crank Hit The price on the articles should be the of USD as the local curryport) Dj Warty in your figure in part) Sports) Uhing the accounts of the central ter who w USD) and the commercial bar (who buys USO Hoe o tect of this transaction on wines and FX Moldes, you can read ove chat robeny weber artiester shot tomorrow on the balance (4 Bened on your answer in portray to the throne in the market for reserves Male sure you tabel your property to recoveredt ponta) Support this central bank want to refect of FX operation Graphical coordings in the foreve barons polet Based on your own partly expectations de by the centre points) Suppose the Central Bank in an emerging market sells its USD reserves to offset the temporary pressures in the foreign exchange market. This question will ask you to analyze the consequences of this action for a hypothetical transaction. a) In the market for FX reserves, illustrate the consequences of this FX sale by the central bank. Hint: The price on the vertical axis should be the value of USD against the local currency. (5 points) b) Verbally explain your figure in part (a) (5 points) c) Using the T-accounts of the central bank (who sells USD) and the commercial bank (who buys USD), illustrate the effects of this transaction on reserves and FX holdings. You don't need to give actual numbers. Simply state whether a particular balance sheet item goes "up" or "down" on the balance sheet. (4 points) d) Based on your answer in part (c), graphically illustrate the change in reserves, in the market for reserve balances. Make sure you label your axes properly to receive full credit. (6 points) e) Suppose that this central bank wants to sterilize the effect of FX operation. Graphically illustrate the corresponding action in the market for reserve balances. (5 points) f) Based on your answer in part (e), verbally explain the necessary action that is undertaken by the central bank. (5 points) 11:55
