A drawback to using changes in domestic credit to adjust the domestic money supply to maintain a peg:
A) is problems in emerging market economies as a result of bond market instability.
B) is the lack of expertise in financial matters in the central banks of emerging markets.
C) is the requirement that currencies flip flop from fixed to floating.
D) is that nations are ignoring a potentially more effective source of currency adjustment.

Question

Quizplus · Accepted Answer

Changes in domestic credit can lead to bond market instability, especially in emerging markets, as they may not have well-developed financial systems to absorb such changes smoothly.

A Drawback to Using Changes in Domestic Credit to Adjust