Explain the market for foreign exchange and the difference between fixed and flexible exchange rate policies: Economics Assignment, UOG, Ireland

Assignment Question

Describe and discuss the features of the Mundell-Fleming policy trilemma as follows:
(a) Explain the market for foreign exchange and the difference between fixed and flexible exchange rate policies.
(b) Explain the movement of capital in international capital markets.
(c) Describe and critically discuss how interest rates, exchange rates and capital movement interact in international parity relations and create a policy trilemma.

Assignment Objectives

This assignment assesses a student’s understanding of the how interest rates, exchange rates and the role of monetary policy all interact with one another, a key learning outcome of the module. While students are not limited to the following, they are expected to:

➢ demonstrate a comprehensive knowledge of the features and functions of different exchange rate regimes and global capital markets.
➢ demonstrate understanding of how monetary policy interacts with exchange rates and capital movements with reference to international parity relations.
➢ provide an accurate and knowledgeable description of how the trilemma occurs due to trade-offs and mutually exclusive choices.
➢ present an analytical discussion of what policymakers might consider to inform exchange rate and monetary policy decisions.
➢ present a critical discussion on the Mundell-Fleming trilemma model.
➢ show familiarity with relevant materials beyond the course manual.