ch13 Exchange Rates and the Foreign Exchange Market An Asset Approach 克鲁格曼国际经济学第六版英文教学课件.pptVIP

Chapter Organization Introduction Exchange Rates and International Transactions The Foreign Exchange Market The Demand for Foreign Currency Assets Equilibrium in the Foreign Exchange Market Interest Rates, Expectations, and Equilibrium Summary Introduction Exchange rates are important because they enable us to translate different counties’ prices into comparable terms. Exchange rates are determined in the same way as other asset prices. The general goal of this chapter is to show: How exchange rates are determined The role of exchange rates in international trade Exchange Rates and International Transactions An exchange rate can be quoted in two ways: Direct The price of the foreign currency in terms of dollars Indirect The price of dollars in terms of the foreign currency  Exchange Rates and International Transactions Exchange Rates and International Transactions Domestic and Foreign Prices If we know the exchange rate between two countries’ currencies, we can compute the price of one country’s exports in terms of the other country’s money. Example: The dollar price of a ￡50 sweater with a dollar exchange rate of $1.50 per pound is (1.50 $/￡) x (￡50) = $75. Exchange Rates and International Transactions Two types of changes in exchange rates: Depreciation of home country’s currency A rise in the home currency prices of a foreign currency It makes home goods cheaper for foreigners and foreign goods more expensive for domestic residents. Appreciation of home country’s currency A fall in the home price of a foreign currency It makes home goods more expensive for foreigners and foreign goods cheaper for domestic residents. Exchange Rates and International Transactions Exchange Rates and Relative Prices Import and export demands are influenced by relative prices. Appreciation of a country’s currency: Raises the relative price of its exports Lowers the relative price of its imports Depreciation of a country’s currency: Lowers the relative price of its exports R