米货币银行学课件师家升

1、标题Your Subtitle Goes HereChapter 19The Foreign Exchange Market3Foreign Exchange Rates4The Foreign Exchange MarketDefinitions:1.Spot exchange rate2.Forward exchange rate3.Appreciation4.DepreciationCurrency appreciates, countrys goods prices abroad and foreign goods prices in that country1.Makes domes

2、tic businesses less competitive2.Benefits domestic consumersFX traded in over-the-counter market1.Trade is in bank deposits denominated in different currencies5Law of One PriceExample: American steel $100 per ton, Japanese steel 10,000 yen per tonIf E = 50 yen/$ then prices are:American SteelJapanes

3、e SteelIn U.S.$100$200In Japan5000 yen10,000 yenIf E = 100 yen/$ then prices are:American SteelJapanese SteelIn U.S.$100$100In Japan10,000 yen10,000 yenLaw of one price E = 100 yen/$6Purchasing Power Parity (PPP)PPP Domestic price level 10%, domestic currency 10%1.Application of law of one price to

4、price levels2.Works in long run, not short runProblems with PPP1.All goods not identical in both countries: Toyota vs Chevy2.Many goods and services are not traded: e.g. haircuts7PPP: U.S. and U.K8Factors Affecting E in Long RunBasic Principle: If factor increases demand for domestic goods relative

5、to foreign goods, E 9Expected Returns and Interest Parity Re forFrancoisAl$ DepositsiD + (Eet+1 Et)/EtiDEuro DepositsiFiF (Eet+1 Et)/EtRelative ReiD iF + (Eet+1 Et)/EtiD iF + (Eet+1 Et)/EtInterest Parity Condition:$ and Euro deposits perfect substitutesiD = iF (Eet+1 Et)/EtExample:if iD = 10% and ex

6、pected appreciation of $, (Eet+1 Et)/Et, = 5% iF = 15%10Deriving RF CurveAssume iF = 10%, Eet+1 = 1 euro/$PointA:Et = 0.95,RF = 0.10 (1 0.95)/0.95 = 0.048 = 4.8%B:Et = 1.00,RF = 0.10 (1 1.0)/1.0 = 0.100 =10.0%C:Et = 1.05,RF = 0.10 (1 1.05)/1.05 = 0.148 = 14.8%RF curve connects these points and is up

7、ward sloping because when Et is higher, expected appreciation of F higher, RF Deriving RD CurvePoints B, D, E, RD = 10%: so curve is verticalEquilibriumRD = RF at E*If Et E*, RF RD, sell $, Et If Et E*, RF iD , real rate , Eet+1 more than iD RF out RD out and Et 16Response to Ms 1. Ms , P , Eet+1 ex

8、pected appreciationof F , RF shifts rightMs , iD , RD shifts leftGo to point 2 and Et 3. In the long run, iDreturns to old level, RD shifts back, goto point 3 and getExchange Rate Overshooting17Why Exchange Rate Volatility?1. Expectations of Eet+1 fluctuate2. Exchange rate overshooting18The Dollar and Interest Rates1.Value of $ and real rates r