For example, assume bank XYZ operates in the United States and deals only with U.S. dollars, while bank QRS operates in Russia and deals only with rubles. Suppose bank QRS has investments in the United States worth $5 million. Assume the two banks agree to enter into a currency sw...
Suppose that if the only international transactions were international trade flows, then the equilibrium exchange rate between the US dollar and the Russian ruble would be 60 rubles to the dollar. Now Describe the impact of a surp...