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Need help answering number 20, on i, ii, iii, and iv. 20) The Asset Approach and the Fixed Exchange Rate Regime [12 points, 3 points

Need help answering number 20, on i, ii, iii, and iv.

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20) The Asset Approach and the Fixed Exchange Rate Regime [12 points, 3 points each] Malaysia pegs its exchange rate to the U.S. dollar (fixed Ewgmmr). The Central Bank of Malaysia is committed to protect its fixed exchange rate regime and capital mobility, under all circumstances. Suppose that a corruption investigation is launched examining the deals the Malaysian Foreign Affairs minister made recently. Due to this news, investors revise their exchange rate forecasts and expect Malaysian ringgit to depreciate against the dollar in the future. (i) What happens in the FX market following the change in exchange rate forecasts? Explain which schedule(s) shift and why. Assume Malaysia to be the home country. (ii) What happens to the equilibrium Em exchange rate? Why? (iii) What happens in the Malaysian money market following the change in exchange rate forecasts? Explain which schedu1e(s) shift and why. (iv) What happens to the equilibrium Malaysian interest rates? Why

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