Using relevant research publications, discuss how the exchange rate affects external balances and the real economy through the so-called trade channel and the so-called financial channel. Discuss also the evidence regarding how the overall effects differ for emerging markets economies (EME) and for advanced economies (AE).
For an EME country of Brazil, analyse its external position since the 2007 financial crisis. Include in the analysis the exchange rate regime and stock of reserves.
Using graphical analysis, discuss whether in the analysis above you found any evidence of the working of the trade channel and/or of the financial channel.
Finally, discuss whether and how the COVID-19 emergency affected the variables you analysed above.
(*) For data on exchange rates, consider nominal and real exchange rates vs US dollar and real and nominal effective exchange rate indices.