In textbook macroeconomic models, a floating exchange rate is viewed as an automatic stabiliser. When the balance of payments of an economy is under stress because of a large current account deficit or a drop in capital inflows, the currency depreciates, causing exports to increase and imports to decline, thus easing the stress. In the other direction, when there is a surplus situation, the currency appreciates, causing the current account deficit to widen, which eases the pressure. Of course, textbook models are oversimplifications, but that does not make them.....
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