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QUESTION
Use the asset market and money market figure to study the short run eects of a change in market belief with regards to the fixed exchange rate, in
Use the asset market and money market figure to study the short run effects of a change in market belief with regards to the fixed exchange rate, in particular assume market participants expect the government to devaluate. Is the effect different from a change in market beliefs with regards to a flexible exchange, in particular assume market participants expect a depreciation?
