PPT-25 The Exchange Rate and the Balance of

Payments Learning Objectives How the exchange rate is determined Trends and fluctuations in the exchange rate The effects of alternative exchange rate policies Causes of international deficits and surpluses. 2. Exchange Rate Essentials. Exchange Rates in Practice. The Market for Foreign Exchange. Arbitrage and Spot Exchange . Rates. . Arbitrage . and . Interest Rates. Conclusions. © 2014 Worth Publishers . International Trade. Foreign Exchange Rates. (AKA FX or . forex. ). What are exchange rates?. The price of a currency in terms of another - the rate . at which one currency can be exchanged for . another (multiply foreign price by exchange rate to calculate). Andrew K. Rose. Visiting Norman-Houblon Fellow. August, 2010. 1. Three Questions. Past: What do We Know about Exchange Rate Regimes Historically?. Rose “Fixed, Floating and Flaky”. Present: How did Different Exchange Rate Regimes do in the “Great Recession”?. Payments. Learning Objectives. How the exchange rate is determined. Trends and fluctuations in the exchange rate. The effects of alternative exchange rate policies. Causes of international deficits and surpluses. While budgeting may not be something you are naturally inclined to do, if you are planning for something like a vacation that has the potential to rack up hundreds of dollars in expenses, it is often the most sensible option, particularly if you are not in a high earning bracket or have other daily costs and expenditures to consider. Fixed vs. Floating. The exchange rate fluctuates in a narrow range (or not at all) against a base currency over a sustained period of time. . Government action is needed to maintain the exchange rate.. 2004-2014. MPA/ID extra lecture, October 20, 2014. Jeffrey Frankel. Example of sterilization of money inflows: China, 2003-2012. API-120 - Prof. . J.Frankel. , Harvard. 3. API-120 - Prof. J.Frankel, Harvard. Chapter 26. McGraw-Hill/Irwin. Copyright © . 2015 . by . McGraw-Hill Education (Asia). . All rights reserved.. Learning Objectives. Define the nominal exchange rate and discuss the advantages and disadvantages of flexible versus fixed exchange rates. Two Episodes:. Currency Board and 2001 Crisis . (. Sturzeneger. talk/ . Feentra. Taylor, other). “. Cepo. ” and Normalization of Jan 2016 (MM Blog, other). Some definitions:. Nominal Exchange Rate: E= # pesos per dollar. Which gases will leaves be exchanging?. Gas Exchange in Leaves. What features will gas exchange organs have to maximise the rate of exchange?. Large surface area, short diffusion pathway, concentration gradient. Foreign Exchange Intervention. 18-. 2. Preview. Balance sheets of central banks. Intervention in the foreign exchange markets and the money supply. How the central bank fixes the exchange rate. Monetary and fiscal policies under fixed exchange rates. the Mundell-Fleming model. Case 1. Flexible exchange rate regime. Monetary policy effectiveness. (Changes in money supply). An increase in money supply (M/P=l. 1. Y-l. 2. i eq.1.6) reduces the local interest rate and increases investments and output (eq. 1.1 and 1.3). Since the model represents an open economy, the local interest rate is now lower than the global interest rate. The UIP is no longer verified (. IIP . Methods, Tools and Applications for Germany. Ulf von . Kalckreuth. , Principal Economist-Statistician, DG Statistics, Deutsche Bundesbank*. *The paper is joint work with Stephanus . Arz. and Stefan . Of. . Payment. (BOP). Introduction. Balance of payments . (BOP) . accounts . are . an . accounting . record . of all monetary transactions . between a . country . and . the . rest . of the . world. These .