In the News
Deflation and the Exchange Rate
19th April 2015
One of my students asked a pertinent question as part of revision a couple of days ago. Will deflation cause an appreciation of the local currency because real interest rates will be high and "hot money flows", or a depreciation because of animal spirits and the resulting capital flight? Or will there be a depreciation because the common response to deflation is to lower nominal interest rates, reducing real interest rates, while there are still low animal spirits?
- Economics
- Blog
- In the News
- Exchange Rate
- Real exchange rate
- Floating exchange rate
- Interest rates
- Nominal interest rate
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.
You might also like
60 Second Adventures in Economics- The Impossible Trinity
20th September 2012
Do interest rates affect business investment?
17th October 2014
Monetary Policy: Key Factors Affecting Interest Rates
17th August 2014
econoMAX - How does Quantitative Easing affect the Exchange Rate
7th November 2013
Monetary Policy less powerful in recessions
9th October 2013
Low or zero inflation is normal: competition keeps it that way
24th September 2014
AS Macro Key Term: Deflation
24th May 2011