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Exchange rate
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grachtel
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Post: #1
Exchange rate

Hi guys,

How to depreciate my currency? I have tried higher money growth as well as lower interest rates, in my opinion two very, very useful tools to manage the exchange rate but nothing happened so far and export slowdown is a serious drag on growth.
How to tackle this issue?

Best,
grachtel

04.05.2008 02:17
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Malone
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Post: #2
RE: Exchange rate

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I have tried higher money growth as well as lower interest rates, in my opinion two very, very useful tools to manage the exchange rate


Indeed!

Quote:
but nothing happened so far


Rough rule of thumb: the inflation should be higher then the real economy growth, in order to achieve a decreasing exchange rate. But is that really what you want?

Quote:
and export slowdown is a serious drag on growth.


Take a look at Germany. The real one Wink


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04.05.2008 08:40
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grachtel
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Post: #3
RE: Exchange rate

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Rough rule of thumb: the inflation should be higher then the real economy growth, in order to achieve a decreasing exchange rate. But is that really what you want?

Suspect
I doubt that. Standard theory would predict that my currency should depreciate if my returns are less than elsewhere. My real interest rate should be lower than in the standard state, making investment into my currency less likely. Hence, my currency should depreciate, accelerated by the large trade deficit, where currency flows out at an ever increasing rate.
I know that real germany is doing fine although the euro is rising, but my exports are shrinking, my imports are growing and I just dont want that to be Wink I want to get my currency down from 1,09 but I just cannot do it apparently.

04.05.2008 14:28
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Malone
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Post: #4
RE: Exchange rate

Standard theory... Here in Ars Regendi are about ten determinants of the exchange rate, trade deficit is one of them. None of them are the values of the average state. It would have been too complicated to compute such dependencies.


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04.05.2008 15:09
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grachtel
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Post: #5
RE: Exchange rate

So how can I force a depreciation? Lower interest rates and higher money growth did not work, in fact it appreciated over time.

04.05.2008 18:07
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Malone
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Post: #6
RE: Exchange rate

You did not make that sufficiently.


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04.05.2008 20:05
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