oussama94
05-29-2017, 00:12
This currency substitution model is a continuation of the monetary model
since it takes into account a nation’s investor flows. It posits that the shifting
of private and public portfolios from one nation to another can have
a significant effect on exchange rates. The ability of individuals to change
their assets from domestic and foreign currencies is known as currencysubstitution. When this model is added to the monetary model, evidence
shows that shifts in expectations of a nation’s money supply can have a decided
impact on that nation’s exchange rates. Investors are looking at monetary
model data and coming to the conclusion that a change in money flow
is about to occur, thus changing the exchange rate, so they are investing accordingly,
which turns the monetary model into a self-fulfilling prophecy.
Investors who subscribe to this theory are merely jumping on the currency
substitution model bandwagon on the way to the monetary model party.
since it takes into account a nation’s investor flows. It posits that the shifting
of private and public portfolios from one nation to another can have
a significant effect on exchange rates. The ability of individuals to change
their assets from domestic and foreign currencies is known as currencysubstitution. When this model is added to the monetary model, evidence
shows that shifts in expectations of a nation’s money supply can have a decided
impact on that nation’s exchange rates. Investors are looking at monetary
model data and coming to the conclusion that a change in money flow
is about to occur, thus changing the exchange rate, so they are investing accordingly,
which turns the monetary model into a self-fulfilling prophecy.
Investors who subscribe to this theory are merely jumping on the currency
substitution model bandwagon on the way to the monetary model party.