Underlying the emerging markets currency crises is a fundamental conflict among policy objectives that the target nations have failed to resolve. Which one of the following is NOT?

Question

Quizplus · Accepted Answer

IMF bailouts are not a policy objective but rather a tool that may be used to address a currency crisis. The fundamental conflict among policy objectives in emerging markets relates to the tension between maintaining a fixed exchange rate, which can provide greater stability and certainty to investors, and having an independent domestic monetary policy that can adjust interest rates and money supply to stimulate growth or combat inflation. This conflict is further exacerbated by the desire for free capital movement, which can increase foreign investment but also expose countries to the risk of sudden outflows.

Underlying the Emerging Markets Currency Crises Is a Fundamental Conflict