Explore BrainMass

Currency board & central bank - nominal exchange rate target

Describe the chief differences between a currency board and a central bank with a nominal exchange rate target.

Solution Preview

First, the central bank controls the money supply by setting the nominal exchange rate target and then adjusting the money supply to achieve that target. Under a currency board system, there is no central bank. The currency board passively responds to the demand for domestic money by buying or selling foreign exchange for ...

Solution Summary

This posting provides a detailed answer to the student's question.