In Theory, a Direct Exchange Rate Policy Can Succeed If

Multiple Choice

In theory, a direct exchange rate policy can succeed if the objective is exchange rate stabilization. However, in practice, this success also depends on the:

A) level of the official reserves that the central bank holds.
B) right estimation of the long-term equilibrium exchange rate.
C) right estimation of the short-term equilibrium exchange rate.
D) level of deviation between the official and the short-term exchange rate.