If sterilization is a real world phenomenon, the implications of the MAER regarding the causality between domestic credit and reserve changes must be reconsidered.

Question

Quizplus · Accepted Answer

Sterilization affects the relationship between domestic credit and reserve changes, as it involves central bank actions to offset the impact of foreign exchange interventions on the domestic money supply, thus altering the expected causality.

If Sterilization Is a Real World Phenomenon, the Implications of the MAER