Module Exchange Rates and Macroeconomic Policy 44

What you will learn in this Module : The meaning and purpose of devaluation and revaluation of a currency under a fixed exchange rate regime Why open-economy considerations affect macroeconomic policy under floating exchange rates

Exchange Rates and Macroeconomic Policy Why did Britain not adopt the euro? What trade-offs were faced? What was the opportunity cost of this decision?

Devaluation and Revaluation of Fixed Exchange Rates Devaluation and Revaluation of Fixed Exchange Rates Adjusting a fixed exchange rate Devaluation Revaluation Eliminating shortages and surpluses Tool of macroeconomic policy

Monetary Policy Under a Floating Exchange Rate Regime Monetary Policy Under a Floating Exchange Rate Regime Ability to pursue independent monetary policy Monetary policy results in changes in exchange rates and leads to other macroeconomic effects Changes in interest rates have a direct effect in the exchange rates and influence net exports

International Business Cycle International Business Cycle Shocks from abroad Synchronized business cycles Exchange rate regime influences synchronization of business cycles Floating exchange rates should lessen the impact of foreign shocks