Bringing About Realistic Exchange Rates: A Post-Asian Financial Crisis Perspective
This chapter argues that both fixed exchange rates and floating exchange rates can lead us to currency crises, as the host currency may be too strong or the floating currency may itself become too strong. What is needed is “realistic exchange rates” that are compatible with full employment and external balance. This chapter attempts to define the concept and to offer a mechanism for approximating realistic exchange rates operationally.
KeywordsExchange Rate Stock Market Central Bank Full Employment Exchange Rate Regime
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