Thread by @SAH16928046

The impacts of exchange rate volatility on the monetary base has different scenario-based outcomes.
NFA and NDA both can increase and decrease with currency appreciation and depreciation over time.
It might become difficult for the central bank to mop up excess liquidity.

NFAs are Net Foreign Assets(foreign denominated balances) and NDAs(domestic currency denominated balances) are Net Domestic Assets.
That is how most central banks like to categorize the two components of the money supply.
It further breaks down into M1, M2, M3 and so on, etc.

Going back to the basics of Fixed Income Economics and Portfolio Investments aka Bond Markets, we need to understand, the liquidity preference theory, preferred habit theory, and market segmentation theory, to extrapolate yields & risk expectation formations across the rate-curve

Of course, they are many other theories, stochastic processes, and rate differentials, which monetary economists, interest rate watchers and bond traders, use from time to time to predict, curve volatility & explore arbitrage possibilities.
Spot, Short and Long Rate Models vary

No Bond Investment aka Fixed Income Assets Module can be taught without including bootstrapping models, yield curve fitting and interpolation methods, and OAS Option Adj. Spread Modelling, and how vanilla embedded options, impact rate term structures.

Computing Bond Value -at-Risk Measure, based on risk factors dependent on the choice of either using on-the-run and off-the-run curves, will determine the risk measurement, we shall use to compute economic capital
PCA Principal Component Analysis Approach to VaR Computation works