In order to help money accomplish its tasks across national boundaries we need exchange rates – the prices at which currencies can be traded against each other. With respect to exchange rates, three main questions have been debated by academics and central bankers for years: How are they determined? What is their economic impact? And how should monetary policy act?
In several jurisdictions this was achieved by designing policies, such as loan guarantees, that made use of the existing bank lending “infrastructure”. Yet, as corporate revenue losses are unlikely to be recouped entirely, this bridge financing may lead to a permanent increase in leverage for some firms.