Question
Why can fiscal policy become procyclical instead of stabilizing?
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Answer
Recognition, action, and impact lags may make it arrive too late.
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Question
Why are outflow restrictions used during a currency crisis?
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Answer
To prevent capital flight and reserve depletion.
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Question
Why are FX forwards useful to firms and investors with foreign-currency exposure?
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Answer
They hedge exchange-rate risk by locking in a future conversion rate.
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Question
What is the formula for the annualized forward premium or discount on the base currency?
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Answer
racF−SSimesrac12n, where n is months to maturity.
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