Question

If the central bank started printing large quantities of domestic currency (taka), what would happen to net export and net capital outflow?

Answer 1

If central banks start printing more currency (taka), domestic currency will depreciate versus USD. Therefore, exporters will get more taka for every dollar. This will become favorable for exporters and they can become more competitive in the international market. If a currency depreciates, the net capital outflow will increase, since foreign investors will sell off their holdings in that particular country because of perceived weakness, high inflation expectation and belief that there are better opportunities elsewhere.