Special situations in emerging markets and developing economies, such as volatile output and an export dependent economy, usually mean:
A) the prudent level of reserves is much higher than for higher-income nations.
B) there is no way they are able to maintain an exchange rate peg.
C) pegging exchange rates is even more important.
D) pegging exchange rates is much easier because the economies are smaller.

Question

Quizplus · Accepted Answer

Emerging markets and developing economies are more vulnerable to external shocks and fluctuations, making it important for them to have a higher level of reserves to cushion against any adverse effects on their currencies.

Special Situations in Emerging Markets and Developing Economies, Such as Volatile