国际经济学(金融部分)选读.ppt

Table 14-3: Comparing Dollar Rates of Return on Dollar and Euro Deposits Model of Foreign Exchange Markets We use the demand of (rate of return on) dollar denominated deposits and the demand of (rate of return on) foreign currency denominated deposits to construct a model of foreign exchange markets. This model is in equilibrium when deposits of all currencies offer the same expected rate of return: interest parity. Interest parity implies that deposits in all currencies are equally desirable assets. Interest parity implies that arbitrage in the foreign exchange market is not possible. Model of Foreign Exchange Markets (cont.) Interest parity says: R$ = R€ + (Ee$/€ – E$/€)/E$/€ Why should this condition hold? Suppose it didn’t. Suppose R$ R€ + (Ee$/€ – E$/€)/E$/€ Then no investor would want to hold euro deposits, driving down the demand and price of euros. Then all investors would want to hold dollar deposits, driving up the demand and price of dollars. The dollar would appreciate and the euro would depreciate, increasing the right side until equality was achieved: R$ R€ + (Ee$/€ – E$/€)/E$/€ Model of Foreign Exchange Markets (cont.) How do changes in the current exchange rate affect the expected rate of return of foreign currency deposits? Model of Foreign Exchange Markets (cont.) Depreciation of the domestic currency today lowers the expected rate of return on foreign currency deposits. Why? When the domestic currency depreciates, the initial cost of investing in foreign currency deposits increases, thereby lowering the expected rate of return of foreign currency deposits. Model of Foreign Exchange Markets (cont.) Appreciation of the domestic currency today raises the expected return of deposits on foreign currency deposits. Why? When the domestic currency appreciates, the initial cost of investing in foreign currency deposits decreases, thereby lowering the expected rate of return of foreign currency deposits. Table 14-4: Today’s Doll