Question Details

Why do you think the weakening of the currencies did not initially improve the economies 




1.	On August 26, 1998, the day that Russia decided to let the ruble float freely, the ruble declined by about 50 percent. N the following day, called bloody Thursday, stock markets around the world (including the U.S.) declined by more than 4 percent. Why do you think the decline in the ruble had such a global impact on stock prices? Was the market- reaction rational? Would the effect have been different if the ruble- plunge had occurred in an earlier time period, such as four years earlier?

2.	Normally, a weak local currency is expected to stimulate the local economy. Yet, it appeared that the weak currencies of Asia adversely affected their economies. Why do you think the weakening of the currencies did not initially improve the economies during the Asian crisis?




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