Countries with high trade decifit shouldn’t have low forex?
binocular222 asked:
If EX
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If EX
Moreover, lower forex means higher external debt. Therefore, countries with huge debt shouldn't have low forex too?
In my country, both trade decifit and external debt are high but gov still keeps a stable nominal forex while inflation is escalating (which means REER decrease), why?
March 21st, 2009 at 2:19 pm
the exchange rate is determine by markets which make capital inflows and outflows match. This includes trade, investments, tourism, aid, and loans. Inflation happens in all countries and only if the difference in large would it have much effect on exchange rates in a years time.
March 24th, 2009 at 7:03 pm
There are many other variables to consider other than forex flows.
Yes you are right theoretically with EX