Minski货币银行学chapter1.pptVIP

* * * * * * * * * * ? 2013 Pearson Education, Inc. All rights reserved. 17-* Chapter 17 The Foreign Exchange Market Foreign Exchange Market Exchange rate: price of one currency in terms of another Foreign exchange market: the financial market where exchange rates are determined Spot transaction: immediate (two-day) exchange of bank deposits Spot exchange rate Forward transaction: the exchange of bank deposits at some specified future date Forward exchange rate Foreign Exchange Market (cont’d) Appreciation: a currency rises in value relative to another currency Depreciation: a currency falls in value relative to another currency When a country’s currency appreciates, the country’s goods abroad become more expensive and foreign goods in that country become less expensive and vice versa Over-the-counter market mainly banks Figure 1 Exchange Rates, 1990–2011 Source: Federal Reserve; /releases/h10/hist. Exchange Rates in the Long Run Law of one price Theory of Purchasing Power Parity assumptions: All goods are identical in both countries Trade barriers and transportation costs are low Many goods and services are not traded across borders Figure 2 Purchasing Power Parity, United States/United Kingdom, 1973–2011 (Index: March 1973 = 100.) Source: /pub/special/requests/cpi/cpiai.txt. Factors that Affect Exchange Rates in the Long Run Relative price levels Trade barriers Preferences for domestic versus foreign goods Productivity Summary Table 1 Factors That Affect Exchange Rates in the Long Run Exchange Rates in the Short Run: A Supply and Demand Analysis An exchange rate is the price of domestic assets in terms of foreign assets Supply curve for domestic assets Assume amount of domestic assets is fixed (supply curve is vertical) Demand curve for domestic assets Most important determinant is the relative expected return of domestic assets At lower current values of the dollar (everything else equal), the quantity demanded of dollar assets is higher Figure 3 Equilibriu