Post
Topic
Board Economics
Merits 5 from 3 users
Re: Rampant inflation, yet a steady exchange rate.
by
Upgrade00
on 05/09/2020, 18:04:40 UTC
⭐ Merited by The Pharmacist (2) ,LoyceV (2) ,NotATether (1)
Doesn't inflation also cause exchange rates to increase, in an inflationary way?
If your country uses a floating rate i.e, one which mirrors changes in the economy, (as opposed to a fixed rate; which is pegged to another currency) then it would be influenced by changes such as inflation and the exchange value would be affected. Sudan currently uses a regulated floating policy, which means it is still controlled to an extent by the government/banks.

Exchange rates are quite tricky to understand and calculate, bank rates are based on mid market rates, which is the average of buy and sell rates, all three figures are different. You should also note that when converting a currency as an individual, you are technically buying money from an agency, so a commission is placed on it, all these factors can influence the exchange value.
Banks also implement fiscal policies to affect the economy, such as OMO ~ open market operations, QE ~ quantitative easing etcetera, so the inter bank rate is regulated, you could check out the conversion rate on black markets as they would show the changes in the economy more.
This is an excerpt from an article posted in July;
The country’s currency recently fell to a record low of 150 Sudanese pounds to the dollar on the black market, compared with 55 at the official rate. The black market rate was 140 pounds to the dollar on Wednesday.