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Then the peg to other currencies would be wrecked and external investment would be destroyed, and the banks would not be able to profitably push out new loans.
by enkid 9y ago
Then the peg to other currencies would be wrecked and external investment would be destroyed, and the banks would not be able to profitably push out new loans.
- eru 9y agoYes, there would be side-effects. The classic formulation in economics is you can at most pick two out of three for your monetary policy: control over domestic variables like GDP, open capital markets, control over exchange rates. I was suggesting to leave the capital markets open and stabilize GDP, but to give up on control over exchange rates. That's basically how the Bank of England reacted after the Brexit referendum: they let the pound take the hit so that the real economy wouldn't have too. Not sure what you mean by 'external investment would be destroyed'?