Nevertheless, if the aforementioned risk concerning the U.S. economy materializes and economic activities in advanced countries are weaker than expected, growth in emerging and commodity-exporting economies might come under downward pressure, generated by a decline in trading volume and an outflow of capital.
The second feature of our macroeconomic framework that I want to emphasise is that we have a flexible exchange rate. We don’t attempt to control the level of the exchange rate because it is neither feasible in a small open economy subject to external shocks nor is it desirable, as I will explain later when I discuss the sectoral effects of the depreciation.