The asset market approach to exchange rate determination
A) suggests that investors will hold monetary claims if the rates are low.
B) suggests that investors will hold monetary claims if they feel optimistic about country's outlook for growth and profitability.
C) states that equilibrium exchange rate is found when the net inflow (outflow) from current account matches the net outflow (inflow) from financial account.
D) discards the importance of corporate governance to cross-border portfolio investors.

Question

Quizplus · Accepted Answer

The asset market approach to exchange rate determination suggests that investors will hold monetary claims if they feel optimistic about a country's outlook for growth and profitability. This is because they believe that investing in the country will result in higher returns.

The Asset Market Approach to Exchange Rate Determination