question archive There is a large literature in international economics discussing domestic economic effects due to foreign monetary policy
There is a large literature in international economics discussing domestic economic effects due to foreign monetary policy
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There is a large literature in international economics discussing domestic economic effects due to foreign monetary policy. This is known as international monetary policy transmission. Over the past few years, until the COVID-19 pandemic, the USA had been increasing interest rates. In the context of Kazakhstan (or any other emerging market economy), what would be the effect of this interest rate increase in the USA on Kazakh GDP, interest rate, and exchange rate (in tenge per dollar)? For your answer consider the Mundell-Flemming model and explain the shifts in curves. Feel free to draw the graph. a) First answer assuming KZ has a fixed exchange rate regime with the dollar. b) Now answer the above assuming KZ has a floating exchange rate regime.
