General/XR Analysis
XR Regimes
Real XR/Misalignments
FX Interventions and Reserves
Currency Crises
Early Warning Systems
100

Under credible fixed exchange rate regimes and perfect capital mobility, which of the following must occur?

a. The central bank must use monetary policy rates to affect domestic output

b. In the absence of a risk premium, the domestic and foreign interest rates must be equal

c. Faced with a shock, the economy must adjust rapidly

d. Inflation in the domestic country must be higher than that in the anchor economy

b. In the absence of a risk premium, the domestic and foreign interest rates must be equal

100

When hit with a terms of trade shock, compared to pegs, in countries with a floating XR regime, the responses…:

a. … of real XR are larger and of GDP are smaller

b. … of real XR are smaller and of GDP are larger

c. … of both real XR and GDP are smaller

d. … of both real XR and GDP are larger

a. … of real XR are larger and of GDP are smaller

100

Which of the following is the work horse model in exchange rate assessment at the IMF?

a. The Current Account Approach

b. The REER approach

c. The External sustainability approach

d. None of the above

a. The Current Account Approach

100

What is NOT a common motive for FX interventions:

a. Smoothing the impact of commodity price fluctuations

b. Limiting excessive swings in the exchange rate

c. Building FX reserves

d. Attracting capital inflows

d. Attracting capital inflows

100

Which of the following is true about twin (and triple) crises:

a. They are usually accompanied by multiple weak and deteriorating economic fundamentals

b. Banking crises tend to coincide with, or precede currency crises and sovereign debt crises

c. They are far more severe than separate banking/currency/debt crises

d. All of the above

d. All of the above

100

Which country was the largest oil producer in 2024?

a. Saudi Arabia

b. Russia

c. USA

d. Canada

c. USA

200

Under imperfect capital mobility:

a. Monetary policy can be used to affect prices/output

b. Monetary policy can be used to affect the exchange rate

c. Fiscal policy can be used to affect output

d. All of the above

d. All of the above

200

For a successful adoption and maintenance of a pegged XR regime in a typical emerging economy:

a. Disciplined fiscal policy is desirable.

b. Disciplined fiscal policy is necessary.  

c. Fiscal policy stance does not matter.

d. Fiscal and monetary policy decisions should support economic growth.

b. Disciplined fiscal policy is necessary.  

200

If domestic policies are at desirable levels, will the policy gap be zero?

a. Yes

b. No

b. No

200

For a typical emerging economy, maintaining FX reserves:

a. Results in a central bank profit of 0.5% of GDP

b. Has no costs

c. Costs around 0.5% of GDP

d. Costs above 2% of GDP

c. Costs around 0.5% of GDP

200

In the first-generation currency crisis, the attack of the currency...

In first generation currency crises, the attack on the currency…

a. … can be stopped if the government announces a 5 -year fiscal consolidation program

b. … can be stopped if the central bank increases interest rates by more than 5 percentage points

c. … will be unsuccessful

d. … will be successful

d. will be successful

200

Which indicator is better to use to identify currency crisis episodes?

a. Change in nominal exchange rate

b. Change in real exchange rate

c. Change in foreign exchange reserves

d. Change in exchange market pressure index

d. Change in exchange market pressure index

300

Which of these famous economists has also been a central bank governor?

a. Paul Krugman

b. Joseph Stiglitz

c. Stanley Fischer

d. Olivier Blanchard

c. Stanley Fischer

300

According to the bipolar view of exchange rate regimes:

a. A managed float is preferable to a free float

b. A conventional peg is preferable to a horizontal band

c. A crawling peg is preferable to a crawling band

d. A currency board is preferable to a stabilized arrangement

d. A currency board is preferable to a stabilized

300

Which of the following is NOT true?

a. EBA is an assessment informed by model

b. EBA is an assessment informed by both model and judgement

c. EBA has a vetting process to ensure multilateral consistency

d. EBA takes into account desirable policies

a. EBA is an assessment informed by model. 

300

Singapore is not just one island; it comprises of how many islands/islets in total?

a. 5

b. 24

c. 64

d. 70

c. 64

300

Besides multiple equilibria, what is a common feature of second generation currency crises?

a. Self-fulfilling expectations

b. Bank runs

c. Sovereign default

d. Currency mismatches

a. Self-fulfilling expectations

300

Which threshold for classifying an observation as a currency crisis will likely result in more false alarms?

a. Sample mean of the exchange market pressure index + 1 standard deviation

b. Sample mean of the exchange market pressure index + 1.5 standard deviation

c. Sample mean of the exchange market pressure index + 2 standard deviation

d. Sample mean of the exchange market pressure index + 2.5 standard deviation

a. Sample mean of the exchange market pressure index + 1 standard deviation

400

Which of the following tends to have most empirical support:

a. Covered Interest Parity holds

b. Uncovered Interest Parity holds

c. Absolute PPP holds

d. Relative PPP holds

a. Covered Interest Parity holds

400

Which year did Singapore gain independence?

a. 1950

b. 1965

c. 1970

d. 1995

e. 2004

b. 1965

400

Under relative PPP, with a domestic inflation of 5%, a foreign inflation of 2%, a nominal exchange rate depreciation of 3%, the real exchange rate:

a. Appreciates by 3%

b. Depreciates by 3%

c. Is unchanged

d. Depreciates by 6%


c. Is unchanged

400

In which of the following cases are higher FX reserves needed:

a. A fully fledged inflation targeting regime

b. Capital control measures on inflows

c. Capital control measures on outflows

d. Export structure: copper (55%), textiles (20%), processed food (15%) and miscellaneous (10%)

d. Export structure: copper (55%), textiles (20%), processed food (15%) and miscellaneous (10%)

400

The country in Asia with the most Miss Universe titles?

a. Thailand

b. India

c. Philippines

d. China

c. Philippines

400

How to choose an optimal cut-off value for the crisis probability to signal a crisis?

a. Optimal cutoff probability should maximize Type 1 error + Type 2 error

b. Optimal cutoff probability should minimize Type 1 error + Type 2 error

c. Optimal cutoff probability should minimize Type 1 error

d. Optimal cutoff probability should maximize Type 2 error


b. Optimal cutoff probability should minimize Type 1 error + Type 2 error

500

Micronesia is a small open economy with relatively high capital mobility. Expected exchange rate was 10 Micronesian dinars (MND) per 1 US dollar. Micronesia’s CB suddenly increases interest rate from 9% to 15% reacting to US Fed unexpected decision to increase rate by 1 pp. What happens to dinar at the local FX market nearest time?

a. Depreciates by 5%

b. Appreciates by 6%

c. Remains the same as this affects only the long-run expected exchange rate

d. Changes its value to 9.5 MND/USD

d. Changes its value to 9.5 MND/USD

500

Which of the following is NOT true?

a. Advanced economies tend to have freely floating regimes

b. Developing economies tend to have pegged regimes

c. There are more de facto than de jure floats

d. There are more de jure than de facto floats

c. There are more de facto than de jure floats

500

Using data below, estimate how much REER has to adjust and whether this adjustment is appreciation or depreciation to bring the current account gap to zero?


Current account gap (% of GDP) = adjusted CA – norm: -2.0

REER elasticity (ε) to current account: -0.4

RRER gap (%); + is overvaluation ?

a. Appreciation of 5.0%

b. Depreciation of 5.0%

c. Appreciation of 0.8%

d. Depreciation of 0.8%

b. Depreciation of 5.0%

500

In terms of traditional metrics, with a purely domestic contractionary shock hitting the economy:

a. The reserve adequacy worsens

b. The reserve adequacy improves

c. The Guidotti-Greenspan rule indicates higher reserve needs

d. The Guidotti-Greenspan rule indicates lower reserve needs

b. The reserve adequacy improves

500

Third generation currency crises arise because of:

a. Fiscal vulnerabilities

b. Financial sector vulnerabilities

c. High unemployment rates

d. Market manipulation

b. Financial sector vulnerabilities

500

Which of the following Early Warning Systems performs better if you put more importance on avoiding Type II error?

a. EWS 1: 30% of crisis signals are false alarms, 50% of crises are missed

b. EWS 2: 50% of crisis signals are false alarms, 30% of crises are missed

c. EWS 3: 20% of crisis signals are false alarms, 40% of crises are missed

d. EWS 4: 40% of crisis signals are false alarms, 20% of crises are missed

d. EWS 4: 40% of crisis signals are false alarms, 20% of crises are missed