国际货币与金融经济学课件02

1、Chapter 2:The Market for Foreign ExchangeI. Chapter OverviewChapter 2 begins with a description of the foreign exchange market, in particular the spot market. After presenting a table of exchange rates, the section explains currency appreciations and depreciations. It next shows how a pair of bilate

2、ral rates can be used to compute the cross rate for a given currency. The section also demonstrates how to compute the bid-ask spread and the bid-ask margin for a currency, and distinguishes between the nominal and real exchange rates. The next section defines the concept of an effective exchange ra

3、te as weighted-average value of a currency relative to a selected group of currencies. Examples of such weighting include multilateral weights, which reflect the trade flow of the individual country with all countries included in the index relative to the total trade volume among all countries inclu

4、ded in the index, and bilateral weights, which reflect the trade flow of the domestic country with respect to each of the countries relative to the total trade of the domestic country with each of the countries included in the index. A detailed numerical example is provided for a bilateral weighted

5、effective exchange rate for the U.S. The next section provides an example of a composite currency, specifically the International Monetary Funds Special Drawing Rights. Its construction is discussed in detail.The next section of the chapter presents foreign exchange arbitrage. An example of triangul

6、ar arbitrage is provided. The following section explains and motivates-using the concept of derived demand-the supply of and demand for a currency. It then shows the determination of the equilibrium exchange rate. Finally, it uses the supply and demand diagram to show how a nations would intervene i

7、n the foreign exchange market to maintain a given exchange value.The final section of this chapter is devoted to the idea of purchasing power parity, PPP, as a simple theory of the determination of the exchange rate. Specifically, absolute PPP is equated to the international law of one price, and is

8、 defined as a condition whereby in the absence of transportation costs, tax differentials or trade restrictions, the price of any two internationally traded and identical goods or services must be the same once they are adjusted by the value of the exchange rate between the two national currencies.

9、Relative PPP, by contrast, is defined as the condition whereby changes in the prices of any two internationally traded and identical goods or services must be the same once they are adjusted by the change in the value of the exchange rate between the two national currencies. The text discusses probl

10、ems associated with the measurement of these PPP concepts as applied to baskets of goods, particularly when price deflators such as the CPI are based on different baskets for different countries. The chapter concludes by indicating that the empirical evidence tends to favor the weaker relative PPP c

11、ondition more than it does the absolute PPP condition, but that both are relatively poor guides to short-run movements in the exchange rate for most major economies.II. OutlineA.Exchange Rates and the Market for Foreign Exchange1.The Role of the Foreign Exchange Market2.Exchange Rate as Relative Pri

12、cesa.Currency Appreciation and Depreciationb.Cross Rates 3Bid-Ask Spreads and Trading Marginsa.The Bid-Ask Spreadb.The Bid-Ask Margin4.Real Exchange Rates5.The Effect of Price ChangesB.Measuring the Overall Strength or Weakness of a Currency: Effective Exchange Rates1.Constructing an Effective Excha

13、nge Rate2.A Two-Country Example of an Effective Exchange Ratea.Constructing Bilateral Weightsb.Determining Relative Exchange Ratesc.what and Effective Exchange Rate Tells Us3.Real Effective Exchange RatesC.Composite Currencies1.Special Drawing Right (SDR)2.Calculation of the SDRD.Foreign Exchange Ar

14、bitrageE.The Demand for and Supply of Currencies1.The demand for a Currencya.Illustrating the Demand Relationship: The Demand Curveb.A Change in Demand2.The Supply of a Currencya.Illustrating the Supply Relationship: The Supply Curveb.A Change in Supply3.The Equilibrium Exchange Ratea.Illustrating t

15、he Market Equilibriumb.Example: A Change in Demand4.Foreign exchange Market InterventionF.Purchasing Power Parity1.Absolute Purchasing Power Paritya.Arbitrage and PPPb.Absolute PPPc.Practical Problems and Shortcomings of Absolute PPP2.Relative Purchasing Power ParityG.Chapter SummaryIII. Fundamental

16、 Issues1.What is the foreign exchange market?2.What does it mean when a currency has appreciated or depreciated?3.How is the general value of a currency measured?4.What is foreign exchange arbitrage? 5.What determines the value of a currency?6.What is purchasing power parity, and is it useful as a g

17、uide to movements in exchange rates? IV. Chapter Features1.Online Notebook: “Online Foreign exchange Services”This notebook examines to rise of Internet sites offering foreign exchange services. An important feature of these Web based services is that it allows for smaller trades and can be very ben

18、eficial for the increasing number of firms engaged in international transactions. Although Web-based foreign exchange trading only accounts for about 15 percent of the overall market value, it is expected to increase in the near future.For Critical Analysis: If most of the Online trades are small-va

19、lued transactions, then they are not likely to have much of an impact on exchange rates levels and volatility. If, however, big firms such as Mastercard start conducting transactions via the Web, then these transactions may impact exchange value which are typically determined by inter-bank transacti

20、ons.2. Policy Notebook: The Big Mac IndexThis feature describes the Economist magazines popular Big Mac index, a regular annual feature of the magazine. The index compares the average price of a Big Mac among different countries in dollar prices after adjusting for the exchange rate. Comparisons of

21、these dollar prices are used to imply over- or undervaluation of a currency using the underlying PPP theory. For Critical Analysis: Exchange values are determined by transactions in a vast array of goods, services, and financial assets. Hence, exchange rates are not likely to respond to internationa

22、l price differentials of a single good. Rather, the prices of a single good, such as a Big Mac will adjust.3. Management Notebook: Does the Border Between Canada and the United States Matter?The notebook applies the idea of purchasing power parity to compare prices of goods in cities similar distanc

23、es apart. In one pair of cities, the cities are located in the same country; while another pair of cities will be located in adjoining countries. A comparison should allow us to see whether, after controlling for distance between the cities, a border seems to matter for international prices. A study

24、 cited indicates that the border between the U.S. and Canada is equivalent to 1,780 miles. Thus, a border still seems to matter, even after a free trade agreement like NAFTA.For Critical Analysis: If prices in the U.S. and Canada showed evidence of price stickiness, we may expect the spot exchange r

25、ate between these countries to remain relatively constant, if PPP holds. If PPP does not hold, it is likely that the exchange rate would adjust to overall price differentials between the two economies. V. Answers to End of Chapter Questions1.Because it costs fewer dollars to purchase a euro after th

26、e exchange rate change, the euro depreciated relative to the dollar. The rate of depreciation (in absolute value) was (1.2168 1.2201)/1.2201100 = 0.27 percent.2.If we take the inverse of each rate, the formula provided in the questions becomes:Returning to the table on page 37, the pound appreciatio

27、n is:(0.5511 0.5501)/0.5501*100 = 0.18, which is the same value derived on page 39.3.Note that the rates provided are the foreign currency prices of the U.S. dollar. Every value has been rounded to two decimal places which may cause some differences in answers.A$C$Sfr$Australia-2.351.061.121.53Brita

28、in0.42-0.450.470.65Canada0.952.23-1.061.45Switzerland0.902.110.94-1.37United States0.651.540.690.73-4.The cross rate is 1.702/1.234 = 1.379 (/), which is smaller in value than that observed in the London market. The arbitrageur would purchase 587,544 ($1,000,000/1.702) with the $1 million in the New

29、 York market. Next they would use the 587,544 in London to purchase 837,250 (587,544*1.425). Finally, they would sell the 837,250 in the New York market for $1,033,167 (837,250*1.234). The profit is #33,167.5.Total trade is (163,681 + 160,829 + 261,180 + 210, 590) = 796,280. Trade with the Euro area

30、 is (163,681 + 261,180) = 424,861. Trade with Canada is (160,829 + 210,590) = 371,419. The weight assigned to the euro is 424,861/796/280 = 0.53 and the weight assigned to the Canadian dollar is 0.47. (Recall the weights must sum to unity.)Because the base year is 2003, the 2003 EER is 100. The valu

31、e of the 2004 EER is:(0.82/0.88)0.53 + (1.56/1.59)0.47100 = (0.4939 + 0.4611)100 = 95.4964, or 95.5. This represents a 4.5 percent depreciation of the U.S. dollar. 6.The real effective exchange rate (REER) for 2003 is still 100. The real rates of exchange are, for 2003, 0.88(116.2/111.3) = .9187, 1.

32、59(116.2/111.7) = 1.6541, and for 2004, 0.82(119.0/114.4) = 0.8530, 1.56(119.0/115.6) = 1.6059. The value of the 2004 REER is: (0.8530/0.9187)0.53 + (1.6059/1.6541)0.47100 = (0.4921 + 0.4563)100 = 94.84, or 94.8. This represents a 5.2 percent depreciation of the U.S. dollar in real terms7.This is a

33、nominal appreciation of the euro relative to the U.S. dollar. The percent change is (1.19 1.05)/1.05100 = 13.3 percent.8.The January 200 real exchange rate is 1.05(107.5/112.7) = 1.0016. The May 2004 real rate is 1.19(116.4/122.2) = 1.1335.9.In real terms the euro appreciated relative to the U.S. do

34、llar. The rate of appreciation is (1.1335 1.0016)/1.0016*100 = 13.17 percent.10.Absolute PPP suggests the May 2004 exchange rate should be 122.2/116.4 = 1.0498. The actual exchange rate is 1.19. Hence, the euro is overvalued relative to the U.S. dollar by (1.19 1.0498)/1.0498100 = 13.35 percent.11.R

35、elative PPP can be used to calculate a predicted value of the exchange rate as:SPPP = 1.05(122.2/112.7)/(116.4/107.5) = 1.0014. 12.The actual exchange rate is 1.19. Hence, the euro is overvalued relative to the U.S. dollar by (1.19 1.0014)/1.0014100 = 18.83 percent.VI. Multiple Choice Questions1. A

36、market that involves the immediate sale or purchase of an asset is known as a(n)A.currency market.B.bond market.C.spot Market.D.free market.Answer: C2. The minimum value of a spot currency transaction is generallyA. $100,000.B. $500,000.C. $1 million.D. $5 million.Answer: C3.If the currency-per-U.S.

37、 dollar exchange rate of the New Zealand dollar is 1.5, what is one New Zealand dollar worth in terms of U.S. dollars?A. $0.50 B. $0.67 C. $1.00 D. $1.50 Answer: B4.Suppose exchange rate of the Argentinean peso relative to the U.S. dollar is 3 (Peso/$). If the peso were to undergo a 50 percent depre

38、ciation, the new exchange value would be:A. 1.5. B. 4.5. C. 3.5.D. 0.5.Answer: B5.For which of the following sets of exchange rates has the cross rate been correctly calculated?A. 1 = 2 Swiss francs; $1.50 = 1; $1 = 0.75 Swiss francsB. 200 = $1.00; 1 ringgit = $0.15; 20 ringgit = 1C. 1 = 1.5 euro; 3

39、 Swiss francs = 2 euros; 2.25 Swiss francs = 1D. 100 = $1.00; 1 ringgit = $0.15; 20 ringgit = 1Answer: C6.A Korean trader wishes to make a purchase of Czech crystal worth 3 million Czech korunas. Unfortunately, there is no published value of the Korean won to Czech koruna exchange rate. In order to

40、calculate the current price of the crystal in won, the trader will need to calculateA. the real exchange rate.B. a cross rate.C. the purchasing power parity rate.D. South Koreas effective exchange rate. Answer: B7.Suppose the exchange rate between the U.S. dollar and the Canadian dollar is 1.37 (C$/

41、$), while the exchange rate for the British pound is 0.66 (/$). What is the cross rate of Canadian dollars to the British pound (C$/)?A. 2.08 B. 1.37 C. 0.66 D. 0.48 Answer: A8.An American tourist is planning to visit Mexico. The exchange rate at which the tourist can buy pesos in a retail bank is t

42、he:A. bid price.B. ask price.C. forward rate. D. cross rate.Answer: B9.Suppose the bid price of British pounds is $1.49 U.S., and the ask price is $1.51 U.S. What is the bid ask margin?A. 0.02%B. 0.99%C. 1.01%D. 1.32%Answer: D10.The spot exchange rates published in financial newspapers are: A. nomin

43、al exchange rates.B. real exchange rates.C. effective exchange rates.D. forward exchange rates. Answer: A11.Which of the following exchange rates is adjusted for price changes?A. Nominal exchange rate.B. Real exchange rate.C. Effective exchange rate. D. Forward exchange rate.Answer: B12.The table be

44、low reports the movements of prices and exchange rates for the U.S. and Indonesia over a years time. July 1, 2003 July 1, 2004 _ Indonesian rupiah/$U.S. 2,435 14,500 Indonesian price level (CPI) 100 152 U.S. price level (CPI) 100 102During this time, the Indonesian rupiah experienced a nominal A. de

45、preciation and a real appreciation.B. depreciation and a real depreciation.C. appreciation and a real appreciation.D. appreciation and a real depreciation. Answer: B13.Based on the values in the table below, the percentage change in the value of the rupiah was _ and the rate of inflation in Indonesi

46、a was _. July 1, 2003 July 1, 2004 _ Indonesian rupiah/U.S. 2,435 14,500 Indonesian price level (CPI) 100 152 U.S. price level (CPI) 100 102 A. 16.8% depreciation, 2% B. 495.5% depreciation, 52% C. 16.8% appreciation, 52% D. 495.5% appreciation, 52%Answer: D14.The effective exchange rate is A.the ex

47、change rate facing large banks and other high-volume traders.B.the exchange rate facing retail customers.C.the nominal exchange rate adjusted for inflation.D.a measure of the weighted-average value of a currency relative to a selected group of countries. Answer: D 15.An exchange rate that is weighte

48、d by the share of each partner in a nations trade is an example of a A. spot exchange rate.B. effective exchange rate.C. nominal exchange rate.D. real exchange rate.Answer: B16. The Special Drawing Right (SDR) is a A. means by which banks offer their best clients preferential loan rates. B. prelimin

49、ary form of the proposed common currency in Europe.C. composite currency created by the International Monetary Fund.D. type of bank account used by currency traders.Answer: C17. A currency trader engaging in spatial arbitrage would be doing what?A.Purchasing real estate in major financial centers.B.

50、Purchasing an asset in one market and simultaneously selling it at a different price in another market.C.Choosing an investment portfolio that contained assets from many different countries.D.Selling borrowed currency in the hopes that there will be a large appreciation.Answer: B18.The demand for a

51、currency is an example ofA. an aggregate demand.B. a derived demand.C. spatial arbitrage.D. a perfectly elastic demand.Answer: B19.A depreciation of the Japanese yen relative to the U.S. dollar is illustrated as a: A.rightward movement along the demand curve for Japanese yen.B.leftward movement alon

52、g the demand curve for Japanese yen.C.shift rightward in the demand for Japanese yen.D.shift leftward in the demand for Japanese yen.Answer: A20.An increase in the demand for French goods and services will:A.induce a rightward shift in the demand for euros.B.induce a leftward shift in the demand for euros.C.result in a leftward movement along the demand curve for euros.D.result in a leftward movement along the demand curve for euros.Answer: A21.The demand for the U.S. dollar in terms of Swedish krona:A. is perfectly inelastic.B. shifts leftward in response to an increase in Swedish de