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"Accommodating item"BoP language, or Ramanan language?
He he ... but even the IMF and the BIS use this language.
to be clear, was actually a serious question re BoP language etc.not clear on the intuition though - there is no "accommodation" in the sense that any gross capital flow that doesn't offset a current account flow requires an opposite gross capital flow as an offset - there's no choice in that sense - just a question of who ends up pricing and transacting it
or are you now adopting the "loanable funds" model for international capital flows?:)(sorry, couldn't resist)
Well, there is ... the SNB purchases as much foreign currency as the international investors shift funds into the Franc. Some of the funds shifted may reflect as commercial banks holding Euro denominated assets. The rest is held by the SNB. The SNB does not decide on the amount of purchases. In another jargon, it is a below the line item. "there's no choice in that sense"precisely what "accomodating item" means more or less.
Should add to some extent... it's not really a peg but a floor so the SNB can decide to depreciate the Franc a little around 1.2000 but it isn't doing that.
Just for the background .. the standard Monetarist theory is that the inflow leads to a rising money supply and rising wages and hence less exports so the adjustment is happening via the current account.
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