PPT-Exchange-Rate Adjustments

and the Balance of Payments 2011 Cengage Learning All Rights Reserved May not be copied scanned or duplicated in whole or in part except for use as permitted in a license distributed with a certain product or service or otherwise on a passwordprotected website for classroom use. 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 . 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). Rates. and . Asset. . Returns. – . numerical. . example. . . . . Brian Borland. Defensive Coordinator. University of WI-Whitewater. (262) 472-1058. Email: borlandb@uww.edu. INTRODUCTION. Coverage concepts described are in addition to playing or adjusting . with. . 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. 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. 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.. 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. 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 .