Exchange Rates: Dynamics, Expectations and Adjustment
Megan J. Tauline
Nova Science Publishers, 2008 - Business & Economics - 280 pages
An exchange rate is the current market price for which one currency can be exchanged for another. The spot exchange rate refers to the current exchange rate whereas the forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. Exchange rates vary because of changes in the relative demand for different countries' goods and services and because national monetary and fiscal policies are inconsistent with each other. Differences in tax rates and in interest rates cause capital flows which affect a country's balance of payments and, consequently, its exchange rate. An overvalued exchange rate leads to a current account balance of payments deficit and bearish speculative capital movements; an undervalued exchange rate creates a current account surplus and an influx of capital. Volatile exchange rates and volatile interest rates coincide. This book examines important issues in the field.
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International Parity Relationships and a Nonstationary
Fixing the Exchange Rate for an International Financial
Exchange Rate Flexibility and Real Adjustments
6 other sections not shown
absolute value adjustment arbitrage assessment assume assumption autarky benchmark calibration black market bond rate buyers central bank cointegration countries currency board denotes deviations domestic empirical equation estimated exchange rate regime exchange-rate expectation traps expectations dynamics expected excess returns Figure firms fixed exchange rate floating foreign currency foreign exchange market foreign exporters Frydman function gap effect Hong Kong dollar impact imperfect knowledge implies import prices increase individual agents inflation rate interest rate parity Juselius long-run loss aversion LSTAR macroeconomic marginal cost Markov equilibrium markup measure medium-run monetary authority monetary model monetary policy negative nominal exchange rate non-linearities output overvaluation paper parameters parity conditions period persistent movements peseta PPP gap PPP levels ppp term price of nontradables productivity Purchasing Power Parity rate target zone real exchange rate relative price Renminbi Rogoff sector sellers shocks sppp stationary Statistics sticky price subperiod Table trade costs unit root variables