chapter5 what determines exchange rate.pptVIP

Chapter 5 What Determines Exchange Rates? Main contents This Chapter focuses on the determinants of exchange rates. Firstly it focuses on short-run movements in exchange rates, then discusses the long-term trends of exchange rate and its determinants. It introduces the PPP theory and the Monetary approach. At last, we discuss the exchange rate overshooting and How well can we predict exchange rates? Three types of variability for Exchange rates Long-term trends Medium-term trends Short-term variability Figure 1, Panel ASelected Exchange Rates Figure 2, Panel BMore Selected Exchange