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(d) What are four reasons why the policymakers of a country may choose to pursue a fixed exchange rate regime? (e) Suppose that a policymaker
(d) What are four reasons why the policymakers of a country may choose to pursue a fixed exchange rate regime? (e) Suppose that a policymaker decides to maintain fixed rates as well as independent monetary policy, as in this example. What is the main constraint that he or she must respect in this case? Why? (f) Consider a policymaker that faces a coordination decision on whether to intervene in forex markets or not, given that the foreign economy may also do so. The payoffs to each are given below (with the first number in each being the payoffs for Home). Identify all the Nash equilibrium policy outcomes. (d) What are four reasons why the policymakers of a country may choose to pursue a fixed exchange rate regime? (e) Suppose that a policymaker decides to maintain fixed rates as well as independent monetary policy, as in this example. What is the main constraint that he or she must respect in this case? Why? (f) Consider a policymaker that faces a coordination decision on whether to intervene in forex markets or not, given that the foreign economy may also do so. The payoffs to each are given below (with the first number in each being the payoffs for Home). Identify all the Nash equilibrium policy outcomes
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