So based on the CFA econ section… regardless of monetary and fiscal policy (restrictive or aggressive) your currency should appreciate? How does that make any sense? That would mean every country, regardless of policy should be doing well right now.
You might want to elaborate on where you’re getting this from…i.e., provide specific paragraphs where you are getting confused and drawing this “conclusion”
Generally speak, currencies will tend to appreciate in times of restrictive monetary policy and weaken during times of accommodative, similar to what many nations around the world have experienced the past few years. Although if you factor in economic growth this could scenario could be reversed.
oops sorry. page 671; Fiscal Policy and the Foreign Exchange rate. It says that both a more restrictive fiscal policy and a more expansionary fiscal policy should lead to an appreciation of the home currency.
“These influences are conflicting, and it is hard to draw general conclusions on the link between fiscal policy and exchange rates. Many economists believe that the interest rate factor will dominate and that the net result of a more restrictive policy will be a depreciation of the home currency.”