ch13exchangerate determination(國際經(jīng)濟(jì)學(xué)浙江林學(xué)院,岑麗娟)

1、International EconomicsBy Robert J. Carbaugh8th EditionChapter 13:Exchange-Rate DeterminationExchange ratesFactors influencing exchange ratesMarket fundamentalsCurrent account balancesReal incomeReal interest ratesInflation ratesConsumer preferences for domestic or foreign productsProductivity chang

2、es affecting production costsProfitability and riskiness of investments2Exchange ratesFactors influencing exchange ratesMarket fundamentals (contd)Product availabilityMonetary policy and fiscal policyGovernment trade policyMarket expectationsNews about future market fundamentalsSpeculative opinion a

3、bout future exchange rates3Exchange ratesWhen are these factors important?Short run (days) - financial transfersDifferences in real interest ratesShifting expectations of future exchange ratesMedium run (months)Economic cycles4Exchange ratesWhen are these factors important?Long run (years) - movemen

4、ts of goods, services, investment, influenced by:Inflation ratesInvestment profitabilityConsumer tastesReal incomeProductivityTrade policy5Exchange rate componentsExchange rates6Factors influencing exchange ratesReal income differentialsA country with faster economic growth than the rest of the worl

5、d will have a depreciating currency (other things being equal)Imports rise faster than exportsReal income changes can also reflect other processes, which might lead to rising exports7Impact of real income differentialsFactors influencing exchange rates8Factors influencing exchange ratesReal interest

6、 ratesShort term real interest rate differences influence international capital movementsReal interest rate is nominal minus inflationLow short term rates lead to less demand for the currency and depreciationHigh rates lead to greater demand for the currency and appreciation9Impact of interest rate

7、differentialsFactors influencing exchange rates10Factors influencing exchange ratesPurchasing power parityIn theory, a good should cost the same in all countries (aside from tariffs or transportation costs)As a result, exchange rates should end up making prices equal across countriesBy this theory,

8、if two countries have different inflation rates, exchange rates will move in the opposite direction to keep prices the same11Impact of inflation rate differentialsFactors influencing exchange rates12Factors influencing exchange ratesMarket expectationsAs with stock markets, foreign exchange markets

9、react quickly to news or even rumors that point to future changes affecting ratesFuture expectations can be self-fulfilling; speculative bubbles can start without any real information but can become self sustaining for a while13Alternative approaches to exchange ratesMonetary approachFocus on exchan

10、ge rates as the result of supply and demand for money at home and abroadDemand depends on real income, prices, interest ratesSupply is controlled by central banksExchange rates seen as returning domestic money supply to equilibrium after a change14Alternative approaches to exchange ratesAsset-market

11、s approachInvestors (firms and individuals) balance their portfolios among domestic money, stocks and bonds and foreign stocks and bondsShort run exchange rate changes are caused by shifts in the kind and location of financial assets investors want to holdInvestors shift between assets based on mark

12、et expectations for expected returns15Short, long run equilibrium: overshootingExchange rate markets16Exchange rate marketsForecasting exchange ratesJudgmental forecastsSubjective forecasts based on economic, political and other data for a countryTechnical analysisUses historical exchange rate trends to project short-run future movementsFundamental analysisIncludes macroeconomic and policy information into a predictive model17Equilibrium in assets-markets approachAlternat