Does it appear that currency boards make low-inflation policies credible?
What will be an ideal response?
Currency boards have the power to bring in anti-inflation credibility from the country to which the domestic currency is hook. Currency boards typically may not acquire government debt, but it can discourage fiscal deficits leading to reduce a major cause of inflation and devaluation. In order for a currency board to be successful is by increasing the banking sector and that can get the government under pressure to abandon the currency board. Moreover if the markets anticipate that the government is leaving the currency boar, the country may not benefit from the potential of a currency board.
You might also like to view...
The tax-exempt status of municipal bonds implies that, for private firms
A) the user cost of capital will be higher than otherwise. B) the user cost of capital will be lower than otherwise. C) the marginal product of capital will be lower than otherwise. D) the accelerator will be higher than otherwise.
Which of the following financial institutions reported the largest bankruptcy in U.S. history in September 2008?
a. Morgan Stanley b. Goldman Sachs c. Lehman Brothers d. JP Morgan Chase e. Barclays Capital
If a sizable number of workers were switched from full-time to half-time employment, then the official unemployment rate would:
a. rise. b. fall. c. remain unchanged. d. react unpredictably.
The allocation of resources is efficient under an idealized free market system.
Answer the following statement true (T) or false (F)