In practice, both a fixed parity regime and a target zone regime allow the exchange rate to float within a band around the parity level. The most likely rationale for the band is that the band allows...


In practice, both a fixed parity regime and a target zone regime allow the exchange rate to float within a band around the parity level. The most likely rationale for the band is that the band allows the monetary authority to:


A. be less active in the currency market. B. earn a spread on its currency transactions. C. exercise more discretion in monetary policy



Jan 03, 2022
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