PPT-Exchange-Rate Policy &

the Central Bank Chapter 19 Exchange Rates are Volatile Costs of Volatile Exchange Rates Exchange rate volatility increases risk in international finance Ex Many developing economy corporates issue securities in US An exchange rate devaluation will make this more expensive to repay . Two polar cases. Fixed (pegged) exchange rates. CB buys or sells reserves to maintain a set price of foreign exchange. Flexible exchange rates. CB does not intervene in market for foreign exchange. and . In international trade it becomes necessary for individuals in different countries who want to buy and sell from one another to exchange currencies. There are approximately 150 different currencies in circulation in the world today. In the process of trading between nations, foreign exchanges of currency must be made.. 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 . 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”?. Chapter 37 – . Lipsey. THE BALANCE OF PAYMENTS (BOP) . BALANCE OF PAYMENTS ACCOUNTS. Current Account. Records transactions arising from trade in goods and services, from income accruing to capital, or from transfers by residents . Na Yang. 2. Quiz 1. Which of the following paper currencies has more value?. A. US $ 20. B. CNY100. C.they are equal. D. It depends.. 3. Foreign exchange rate. A foreign exchange rate . is the price of one country's currency in units of another country's currency and it refers to as. Sections. Exchange rate arrangements. Balance of payments. Exchange rate regime, before 1976. Desired exchange rate stability.. Currencies were largely anchored, either directly or indirectly, on gold.. 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. Chapter 16 . International Economics. Udayan. Roy. Long Run and Short Run. Long run theories are useful when all prices of inputs and outputs have enough time to adjust fully to changes in supply and demand.. 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. Explain how exchange rate movements are measured.. Explain how the equilibrium exchange rate is determined.. Examine factors that determine the equilibrium exchange rate.. Explain . the movement in cross exchange rates.. Chapter 18 . Krugman. and . Obstfeld. 9e. ECO41 International Economics. Udayan. Roy. Why Study Fixed Exchange Rates?. Four reasons to study fixed exchange rates:. Managed floating. Regional currency arrangements. 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 .