Purpose: During currency crisis, a policy maker may raise the interest rate of the currency to defend it against attacks, inflation, speculation, or depression.
Research Questions: 1. What is the role of small transaction costs in an interest rate defense? @. What is the role of fixed transaction costs in an interest rate defense? 3. How realistic is an interest rate defense?
Hypothesis: How does the policy maker’s readiness to protect their weak currency affect the interest rate? What impact does a speculator have on the fluctuating interest rates of currency?
Main Findings: Using a model related to Morris and Shin’s, the attacks on currency can be stopped or slowed to a manageable degree. The standard deviations between the equilibrium of the currency and the threshold equilibrium define when the interest rates on the currency should be raised. There are many formulas used in this report to support the mathematical findings in this article.
Currency crises with the threat of an interest rate defence. (2011, May). Journal of International Economics, 14(24), 11. Retrieved from http://www.sciencedirect.com.ezproxy.apollolibrary.com/science/article/pii/S0022199611000584
Purpose: During currency crisis, a policy maker may raise the interest rate of the currency to defend it against attacks, inflation, speculation, or depression.
Research Questions: 1. What is the role of small transaction costs in an interest rate defense? @. What is the role of fixed transaction costs in an interest rate defense? 3. How realistic is an interest rate defense?
Hypothesis: How does the policy maker’s readiness to protect their weak currency affect the interest rate? What impact does a speculator have on the fluctuating interest rates of currency?
Main Findings: Using a model related to Morris and Shin’s, the attacks on currency can be stopped or slowed to a manageable degree. The standard deviations between the equilibrium of the currency and the...