Exchange Rates and Financial Fragility

This our weekly discussion of the price level as it relates to Perry Mehrling's money view. The price level is the average price of goods in terms of money or, equivalently, the price of money in terms of goods. But what determines the price level? Why is the price level important? And how does it fit into the money view?

Last week, we explored how the price level interacts with financial instability. This week, we're bringing in exchange rates. To what extent is it possible for countries to implement independent monetary policy? To what extent do floating exchange rates make it easier?

We're reading the 1999 paper "Exchange Rates and Financial Fragility" by Barry Eichengreen and Ricardo Haussmann.

Exchange Rates and Financial Fragility