Chapter 14
... central bank is not obliged to intervene in the foreign exchange market to support a particular exchange rate, and therefore the money supply can change to any level desired by the monetary authorities. With fixed exchange rates, the domestic monetary authorities are not free to conduct monetary pol ...
... central bank is not obliged to intervene in the foreign exchange market to support a particular exchange rate, and therefore the money supply can change to any level desired by the monetary authorities. With fixed exchange rates, the domestic monetary authorities are not free to conduct monetary pol ...
PROBLEM SET 6 14.02 Macroeconomics May 3, 2006 Due May 10, 2006
... Consider an economy with a trade deficit (NX < 0) and output equal to its natural level (Y = Yn ). Assume the Marshall-Lerner condition holds. a. Discuss: “What is needed to reduce the trade deficit is a reduction in the budget deficit. There is no need for an exchange rate depreciation.” Ans: Uncer ...
... Consider an economy with a trade deficit (NX < 0) and output equal to its natural level (Y = Yn ). Assume the Marshall-Lerner condition holds. a. Discuss: “What is needed to reduce the trade deficit is a reduction in the budget deficit. There is no need for an exchange rate depreciation.” Ans: Uncer ...
Lecture 4 Nature and Measurement of Exposure and Risk
... Concept of Exposure • Foreign Exchange Exposure occurs because of unanticipated change in the exchange rate • For example the difference in the spot rate & one month forward rate is 0.30 rupee per USD and after one month rupee depreciates by 30 paisa there would be no FE exposure but if actual depr ...
... Concept of Exposure • Foreign Exchange Exposure occurs because of unanticipated change in the exchange rate • For example the difference in the spot rate & one month forward rate is 0.30 rupee per USD and after one month rupee depreciates by 30 paisa there would be no FE exposure but if actual depr ...
Slide 1
... 2. first pillar = ‘economic analysis’. It consists of a broad review of recent evolution and likely prospects of economic conditions (e.g., growth, employment, prices, exchange rates, foreign conditions); 3. second pillar = ‘monetary analysis’. It studies the evolution of monetary aggregates (M3, in ...
... 2. first pillar = ‘economic analysis’. It consists of a broad review of recent evolution and likely prospects of economic conditions (e.g., growth, employment, prices, exchange rates, foreign conditions); 3. second pillar = ‘monetary analysis’. It studies the evolution of monetary aggregates (M3, in ...
... 2. first pillar = ‘economic analysis’. It consists of a broad review of recent evolution and likely prospects of economic conditions (e.g., growth, employment, prices, exchange rates, foreign conditions); 3. second pillar = ‘monetary analysis’. It studies the evolution of monetary aggregates (M3, in ...
Answers to Problem Set 1
... 10. a. If the Federal Reserve pushed interest rates down, with an unchanged expected future exchange rate, the dollar would depreciate (note that the article uses the term “downward pressure” to mean pressure for the dollar to depreciate). If there is a “soft landing,” and the Federal Reserve does n ...
... 10. a. If the Federal Reserve pushed interest rates down, with an unchanged expected future exchange rate, the dollar would depreciate (note that the article uses the term “downward pressure” to mean pressure for the dollar to depreciate). If there is a “soft landing,” and the Federal Reserve does n ...
LECTURE 10: INFLATION AND UNEMPLOYMENT IN THE OPEN
... Three main questions in an open economy model: (i)What determines the unemployment rate at which inflation is constant? -In open economy PS curve and hence the actual real wage is affected by the real cost of imports, and therefore by the real exchange rate. Ex: A real appreciation means that the re ...
... Three main questions in an open economy model: (i)What determines the unemployment rate at which inflation is constant? -In open economy PS curve and hence the actual real wage is affected by the real cost of imports, and therefore by the real exchange rate. Ex: A real appreciation means that the re ...
Dr. Barry Haworth University of Louisville Department of Economics
... a. heavy reliance upon private property rights in determining how resources flow b. a government that is minimally involved in its economy c. key decisions are made by the private sector d. economic decisions involve centralized decisionmaking e. all of the above 3. Which of the following statements ...
... a. heavy reliance upon private property rights in determining how resources flow b. a government that is minimally involved in its economy c. key decisions are made by the private sector d. economic decisions involve centralized decisionmaking e. all of the above 3. Which of the following statements ...
Problem Set 5 Answers - University of Wisconsin–Madison
... b. Output increases by the multiplier, which equals 1/(1-c1-d1+m1). The condition 0< m1< c1+d1<1 ensures that the multiplier is defined, positive, and greater than one. As compared to the original multiplier, 1/(1+c1), there are two additional parameters: d1, which captures the effect of an addition ...
... b. Output increases by the multiplier, which equals 1/(1-c1-d1+m1). The condition 0< m1< c1+d1<1 ensures that the multiplier is defined, positive, and greater than one. As compared to the original multiplier, 1/(1+c1), there are two additional parameters: d1, which captures the effect of an addition ...
Presentation of paper (in PowerPoint)
... and IBM, dates to August of 1981. The basic idea in a swap contract is that the counterparties agree to swap two different types of payments. Each payment is calculated by applying some interest rate, index, exchange rate, or the price of some underlying commodity or asset to a notional principal. T ...
... and IBM, dates to August of 1981. The basic idea in a swap contract is that the counterparties agree to swap two different types of payments. Each payment is calculated by applying some interest rate, index, exchange rate, or the price of some underlying commodity or asset to a notional principal. T ...
GDP - World Bank Group
... numeraire currency. PLIs are used to compare price levels between countries. The PLI indicates the relative price of GDP (or its components) in a country, as if it were “purchased” after acquiring local currency at the prevailing exchange rate. PLIs are generally low in poorest countries. This refle ...
... numeraire currency. PLIs are used to compare price levels between countries. The PLI indicates the relative price of GDP (or its components) in a country, as if it were “purchased” after acquiring local currency at the prevailing exchange rate. PLIs are generally low in poorest countries. This refle ...
Lecture 1
... With external benefits (a positive externality) too few units are produced at a price below that which would prevail if all the benefits were identified and factored into the market process. ...
... With external benefits (a positive externality) too few units are produced at a price below that which would prevail if all the benefits were identified and factored into the market process. ...
forex - Herricks
... •The increase of value of a country's currency with respect to a foreign currency •Less units of dollars are needed to buy a single unit of the other currency. •The dollar is said to be “Stronger” ...
... •The increase of value of a country's currency with respect to a foreign currency •Less units of dollars are needed to buy a single unit of the other currency. •The dollar is said to be “Stronger” ...
Strong Dollar, Weak Dollar
... Almost every international exchange of goods and services requires the exchange of one currency for another. Less frequently, some countries will barter goods, or settle payments in gold. But most international transactions involve foreign exchange. The individual, firm or government of another cou ...
... Almost every international exchange of goods and services requires the exchange of one currency for another. Less frequently, some countries will barter goods, or settle payments in gold. But most international transactions involve foreign exchange. The individual, firm or government of another cou ...
Kaminisky, Graciela L
... A panel annual data for over 100 developing countries from 1971 to 1992. Define a currency crash: 4 problems need to be solved: a. Should currency crashes be limited to episode that end in a large fall in the value of the currency? b. How big a change in the exchange rate is needed to qualify? c. Ho ...
... A panel annual data for over 100 developing countries from 1971 to 1992. Define a currency crash: 4 problems need to be solved: a. Should currency crashes be limited to episode that end in a large fall in the value of the currency? b. How big a change in the exchange rate is needed to qualify? c. Ho ...
Document
... markets will increase . This will tend to push down the exchange rate. Thus, the overall effect of an increase in inflation is to cause the dollar to depreciate. c. If the foreign interest rate increases relative to the domestic rate, other countries will wish to invest less in the United States. Th ...
... markets will increase . This will tend to push down the exchange rate. Thus, the overall effect of an increase in inflation is to cause the dollar to depreciate. c. If the foreign interest rate increases relative to the domestic rate, other countries will wish to invest less in the United States. Th ...
Purchasing power parity
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Purchasing power parity (PPP) is a component of some economic theories and is a technique used to determine the relative value of different currencies.Theories that invoke purchasing power parity assume that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of, say, US dollars to buy euros and then to use the proceeds to buy a market basket of goods as it would cost to use those dollars directly in purchasing the market basket of goods.The concept of purchasing power parity allows one to estimate what the exchange rate between two currencies would have to be in order for the exchange to be at par with the purchasing power of the two countries' currencies. Using that PPP rate for hypothetical currency conversions, a given amount of one currency thus has the same purchasing power whether used directly to purchase a market basket of goods or used to convert at the PPP rate to the other currency and then purchase the market basket using that currency. Observed deviations of the exchange rate from purchasing power parity are measured by deviations of the real exchange rate from its PPP value of 1.PPP exchange rates help to minimize misleading international comparisons that can arise with the use of market exchange rates. For example, suppose that two countries produce the same physical amounts of goods as each other in each of two different years. Since market exchange rates fluctuate substantially, when the GDP of one country measured in its own currency is converted to the other country's currency using market exchange rates, one country might be inferred to have higher real GDP than the other country in one year but lower in the other; both of these inferences would fail to reflect the reality of their relative levels of production. But if one country's GDP is converted into the other country's currency using PPP exchange rates instead of observed market exchange rates, the false inference will not occur.