This is just like endlessly bailing out water that is overflowing from a bucket without turning off the tap. II. During the crisis: the importance of the lender of last resort role  Now I would like to move on to the next phase: the midst of the crisis.
Ball examines this issue with great finesse and subtlety, but let me try to set out the issues intuitively. It is true that when an exchange rate goes down, this will be expansionary on an economy and if nothing else has happened, then interest rates will need to be higher.