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Identify the economic variable determining FX rates for each of the following approaches and explain transmission channels through which the variable impacts the exchange rates.
Identify the economic variable determining FX rates for each of the following approaches and explain transmission channels through which the variable impacts the exchange rates. Explain these in your own language.
(1) Asset market approach
(2) Monetary exchange rate approach with flexible prices
(3) Monetary exchange rate approach with sticky prices
(4) Portfolio balance approach
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