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Why do all the currencies always depreciate against US Dollar in long term, irrespective of development level in the country?
Why do all the currencies always depreciate against US Dollar in long term, irrespective of development level in the country?
Expert Solution
1) Asset returns are high in US, capital enters US from other countries, so $ appreciates
2) Interest rates are high and bonds are secure in US..so money enters US, $ appreciates
3) US is highly developed in terms of industries, services, higher education, skill, innovations and technology. So, capital enters US from other countries, so $ appreciates
4) $ is the international reserve currency. All countries fix their reserves and currencies with respect to the $.So, capital enters US from other countries, so $ appreciates
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