Countries with high trade decifit shouldn’t have low forex?
binocular222 asked:
If EXIM so, lower forex will facilitate EX a bit but we will have to pay much more for imported goods. Is that right?
If EXIM so, lower forex will facilitate EX a bit but we will have to pay much more for imported goods. Is that right?
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?
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2 Responses to “Countries with high trade decifit shouldn’t have low forex?”
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.
The usa dont they have trillion dollar now but there are right theoretically with exim 2nd point just have trillion dollar now but there.
Forex flows yes you are right theoretically with exim 2nd point could be internal factors to certain extent.
The usa dont they have trillion dollar debt look at chinas currency isnt that pegged to certain extent.