Managed exchange rates lead to lower investment and productivity, study finds.
The article discusses how a country with low income can manage its exchange rate policy. It explains that when labor productivity is low, the exchange rate should be higher than the natural rate. If the exchange rate is expected to fall, people will hold less money. This can lead to lower investment and productivity. By adjusting the exchange rate in response to temporary price changes, a country can reduce inflation and focus on its own economic cycles.