Exchange Rate Policy and Full Employment

By Warren Mosler

4 Responses

  1. “choices are:

    Hold rubles in a clearing account at the Central Bank

    Exchange ruble clearing balances for something else at the CB.

    Buy a Russian GKO (tsy sec), which is an interest bearing account at the CB

    b. Exchange rubles for $ at the official rate at the CB ”

    When option 2b is utilized, ruble clearing balances are removed from the monetary system? And that leads to reduction in rubble-nominated net financial assets?

    When process is in opposite direction, when a nation is running trade surpluses and constantly purchasing more USD reserves, local currency NFA’s are created and nation has to sell more tsy secs, that are commonly called nation’s debt, so that a nation runnig undervalued FX regime has to have constantly raising national debt even if the fiscal budged would otherwise be perfectly balanced?

    Are USD reserve balance purchases done by the central bank or treasury anyways? Do they get counted as fiscal expenditure and get calculated as part of countrys fiscal deficit?

    1. that’s the thing, when the tsy buys fx or the cb buys gold, it doesn’t count as deficit spending, even though functionally it is.
      i call it off balance sheet deficit spending

  2. Warren, I’m reading your paper at the other site.

    Is this a typo?

    Let me address some accounting fundamentals of fixed and floating foreign exchange regimes using the pre-August 17, 1998 Russian ruble as an example.

    pre-August 17, 1998?

    You gave this paper in December 1997.

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