Choice of Exchange Rate Regime in the IFA
If an investment bank changed accounting practice by transferring depreciated securities from the trading portfolio—marked to market daily-to the investment portfolio-valued at historical purchase price-auditors would complain and the bank would face difficulties in completing its audit. The international financial community and private creditors audit debtor countries constantly. Debtor countries with flexible rates cannot fix their currencies currently without risk of a loss of market confidence and resulting pressure on capital flows.
KeywordsExchange Rate Interest Rate Monetary Policy Central Bank Real Exchange Rate
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