oussama94
05-28-2017, 23:58
All of these factors are key to understanding and spotting a monetary
trend that may force a change in exchange rates. For example, the Japanese
economy has been slipping in and out of recession for over a decade. Interest
rates are near zero, and annual budget deficits prevent the Japanese
from spending their way out of recession, which leaves only one tool left
at the disposal of Japanese officials determined to revive their economy:
printing more money. By buying stocks and bonds, the Bank of Japan is increasing
the nation’s money supply, which produces inflation, which forces
a change in the exchange rate. The example in Figure 3.5 illustrates the effect
of money supply changes using the monetary model
trend that may force a change in exchange rates. For example, the Japanese
economy has been slipping in and out of recession for over a decade. Interest
rates are near zero, and annual budget deficits prevent the Japanese
from spending their way out of recession, which leaves only one tool left
at the disposal of Japanese officials determined to revive their economy:
printing more money. By buying stocks and bonds, the Bank of Japan is increasing
the nation’s money supply, which produces inflation, which forces
a change in the exchange rate. The example in Figure 3.5 illustrates the effect
of money supply changes using the monetary model