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An expansionary monetary policy generally leads to

May 28, 2016

Currency Depreciation

If capital mobility is high and fiscal policy is expansionary this is less certain.

If capital mobility is low and fiscal policy is restrictive this is less certain.


From → Economics

  1. only true when flow freely.

    • I think you are referring to this flash card. I had a lot of trouble memorizing that chart but it seems to me that Monetary Policy dominates Fiscal Policy when it comes to Exchange Rates. Interest Rates and other economic conditions obviously matter, but I tried to simplify things to make it easier to remember, maybe I simplified too much.

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