Answer to Question #216162 in Macroeconomics for Kathie

Question

For any developing country, analyze its exchange rate system and all recent developments in its exchange rate policies. Use these to answer the following questions in your writing:
What are monetary and fiscal policy implications of the exchange rate system adapted by the selected country?
What is the devaluation history (dates) of the selected country? Have past devaluations achieved the targeted economic objectives?
How trade has performed in the selected country post-devaluation?
What are your views on ensuring better BOP-NIIP outcomes of this country?
After searching the history of exchange rate regime in your selected country, you explain conceptually about efficacy of each exchange rate system (fixed, floating and pegged) and its implication on monetary policy and fiscal policy. Next discussion should be on devaluation, its objectives and situation analysis post devaluation. Answer all questions above.

Answer 1

The exchange rates were set, however they may be adjusted. This system targeted at preventing excessive volatility related with floating exchange rates and competitive depreciations, while allowing adequate flexibility to adjust to fundamental disequilibrium based on international supervision; private capital flows were obligated to play only a minor function in financing payments imbalances, as well as a wide interest rates range were obligated to be utilized.

Devaluation tend to be the loss of a Nation's monetary unit's exchange value based on silver, gold, or the foreign monetary units. To eliminate recurrent balance-of-payments deficits, devaluation is utilized. A currency depreciation, for instance, will lower the export prices from home nation which are purchased in the import country's currency. While lowering the cost of exporting goods for other firms.