Suppose a monetary authority is holding its countrys exchange rate below the equilibrium value by issuing domestic

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Suppose a monetary authority is holding its country’s exchange rate below the equilibrium value by issuing domestic currency (e.g., the Indonesia rupiah), which the monetary authority uses to buy $10 billion of U.S.

dollars per month.

a. How long can this situation last, assuming that the country has $100 billion of foreign currency reserves?

b. Is there any way an (deep-pocketed) investor can profit from this situation?

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3E Economics

ISBN: 9781292411019

3rd Global Edition

Authors: Daron Acemoglu, David Laibson , John List

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Question Posted: Nov 16, 2024 05:00 AM

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Suppose a monetary authority is holding its countrys exchange rate below the equilibrium value by issuing domestic

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3E Economics

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