Question

Where Is Monetary Policy​ Stronger? In an open​ economy, changes in monetary policy affect both interest rates and exchange rates. Comparing the United States and​ Switzerland, in which country would monetary policy have a more significant effect on GDP through changes in exchange​ rates?

Answer 1

First of all, Switzerland has one of the most open and free market economies in the world, while the US government says that our economy is open but compared to other capitalistic countries, the American economy is a very closed one.

The effects of any change in monetary policy will be more significant in a small open economy like Switzerland since foreign trade is very important to them.

An increase in the money supply will depreciate the currency of a country, and any effect on the exchange rate will affect more an open economy.