Monetary policy affects the ... of goods and assets and (iii) effects through changes in explicit or implicit real interest rates on aggregate demand. - Rudi Dornbusch

In figure 3 we show the money and domestic asset market equilibrium schedules for given stocks of each of the assets. Along MM the domestic money market is in equilibrium. Higher interest rates reduce money demand so that equilibrium requires a depreciation and thus a rise in the domestic currency value of foreign assets and - hence wealth. The exchange rate thus plays a balancing role by affecting the valuation of assets.

If there was ever a bad idea, EMU it is.

Italians dream that the ECB (European Central Bank) will make their life easier than the Bundesbank does now... The new central bank is certain to establish itself at the outset as a direct continuation of the German central bank.