Question Details

The terrorist attacks on the U.S. on September 11, 2001 were expected to weaken 



1. Impact of Crises. Why do you think most crises in countries (such as the Asian crisis) cause the local currency to weaken abruptly?  Is it because of trade or capital flows?


2. Impact of September 11. The terrorist attacks on the U.S. on September 11, 2001 were expected to weaken U.S. economic conditions, and reduce U.S. interest rates. How do you think the weaker U.S. economic conditions would affect trade flows? How would this have affected the value of the dollar (holding other factors constant)?  How do you think the lower U.S. interest rates would have affected the value of the U.S. dollar (holding other factors constant)?




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