Re: "pizazzy" exchange rates

["RICHARD P.F. HOLT" <holtri@xxxxxxxxxxxxx>]

Jim Devine writes about my comments on the Mundell-Fleming model:
"Isn't this only true if the interest rate in the rest of the world
is constant? In the case of fixed exchange rates, monetary
expansion could could cause interest rates elsewhere to fall, if the
country doing the expansion is large enough."

Jim your right. I'm assuming that economy involved is small enough
compared to the rest of the world economy where the borrowing
and lending of the country would not affect the world interest rate.
And this is probably not true with the US, but I'm not sure. What's
interesting though, is given the magnitude of financial mobility
in the world today the power of Central Banks to influence the
markets is becoming more limited. Going to a question that John Gelles
brought up, that's why in my opinion, we need some type of institutional
control over these markets.
-Ric Holt
e-mail: holtri@xxxxxxxxxxxxx