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A small, open economy with a flexible exchange rate faces a severe negative shock to global demand for its primary export. How does the role of the exchange rate in adjusting to this shock differ if the central bank has a credible inflation target versus if it has no explicit policy anchor?
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A small, open economy with a flexible exchange rate faces a severe negative shock to global demand for its primary export. How does the role of the exchange rate in adjusting to this shock differ if the central bank has a credible inflation target versus if it has no explicit policy anchor?
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