Abstract: This chapter gives a first description of how the exchange rate and the foreign exchange reserves of a country are determined. We assume that the country is ‘small’, which in this context means just that foreign interest rates are given exogenously. The country may still be able to influence the interest rate on assets denominated in its own currency. A central topic is how far this influence goes, and what the consequences are of setting interest rates which deviate from those abroad. More details of the plan for the chapter are given towards the end of section 1.1, after we have introduced some basic concepts.
Publication Year: 2000
Publication Date: 2000-09-14
Language: en
Type: book-chapter
Indexed In: ['crossref']
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Cited By Count: 6
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