国际金融讲义oreign Exchange Rate Behavior.ppt

Foreign Exchange Rate Behavior: Major Concept 1.only unanticipated events cause exchange rates to deviate from their expected path of movement. 2. Factors that increase the demand for a currency tend to raise the price of that currency. The demand for a nations money as a currency or as an investment choice depends on a small group of factors including: * National income * Real interest rates * Inflation rate *Changes in national wealth (through the current account) * The preferred currency mix for holding financial wealth * Financial risk factors * Political risk factors When a change in one of these variables occurs--either in the home country or in the foreign country, since it is relative values that determine the exchange rate--we should be able to predict the direction of change in the exchange rate that will follow. 3. The character and the context of the economic news item will greatly influence the nature of the exchange rate response that follows. By character, we mean whether the news item was representing: * An unanticipated or anticipated disturbance. * A permanent or transitory disturbance. * A shock affecting the level of a variable or its rate of change. * A real or nominal (monetary) disturbance. * A shock affecting a single industry sector or an economywide shock. * A shock to beliefs that were weakly held (and therefore easily changed) or strongly held. By context, we mean a variety of factors including (but not limited to): * Whether the monetary authorities are perceived to have discipline relative to their targets. * Whether foreign demand for home country currency and securities is satiated or growing. * Whether prices in the economy are free to adjust quickly (rather than sticky). *Whether the shock resulted from a change in exports (rather than imports) a change in public savings (rather than private savings), and so forth. By the nature of the exchange rate response, we mean: * Wh