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Essay / Research Paper Abstract
This 10 page paper looks at exchange rates and the reasons for devaluation. The models are considered in this context and its' application in the real world. The bibliography cites 7 sources.
Page Count:
10 pages (~225 words per page)
File: TS14_TEmunflm.rtf.
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Unformatted sample text from the term paper:
the Mundell-Fleming model this is a tool that can be used when considering the equilibrium and the impacts of fiscal and monetary policies where there is a relatively open
economy, with both inflows and outflows of both capital and goods. When we consider issues such as devaluation then we need to look at the capital flows. This is because
in a market where supply and demand impact are in use, it is these influences that will also impact on the exchange rate and the flow of goods. However
it is not completely accurate, and there are still some elements that are not fully incorporated into this model. Yet it must be seen as very accurate, as one of
the founders of the theory Ian Fleming, an economist who was a member of the International Monetary Fund, and developed it at the same time as Mundell, received the Nobel
Prize, Mundell was not snubbed, but he had died, and the Nobel prize is not awarded posthumously. Firstly let us consider how it
is that exchange rates are determined in an open market economy, this is needed for the model to make sense. The way in which currencies behave will have a large
impact on any countries import and export business, and as such will be of a significant influence on the balance of payments. When a currency is weak other countries will
find it comparatively cheap to buy firm that country, when they are strong the imports will become comparatively expensive (Davidson, 1992). The
exchange rates in most countries are free floating, this means that they respond to market influences without intervention. A well known exception of this has been those countries in the
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