oussama94
05-28-2017, 23:37
The balance of payments theory states that exchange rates should be at
their equilibrium level, which is the rate that produces a stable current
account balance. Countries with trade deficits experience a run on their
foreign exchange reserves due to the fact that exporters to that nation
must sell that nation’s currency in order to receive payment. The cheaper
currency makes the nation’s exports less expensive abroad, which in turn
fuels exports and brings the currency into balance.
their equilibrium level, which is the rate that produces a stable current
account balance. Countries with trade deficits experience a run on their
foreign exchange reserves due to the fact that exporters to that nation
must sell that nation’s currency in order to receive payment. The cheaper
currency makes the nation’s exports less expensive abroad, which in turn
fuels exports and brings the currency into balance.