ch13 Chapter Organization 克鲁格曼 教材.pptVIP

Table 13-3: Comparing Dollar Rates of Return on Dollar and Euro Deposits The Demand for Foreign Currency Assets Return, Risk, and Liquidity in the Foreign Exchange Market The demand for foreign currency assets depends not only on returns but on risk and liquidity. There is no consensus among economists about the importance of risk in the foreign exchange market. Most of the market participants that are influenced by liquidity factors are involved in international trade. Payments connected with international trade make up a very small fraction of total foreign exchange transactions. Therefore, we ignore the risk and liquidity motives for holding foreign currencies. The Demand for Foreign Currency Assets Equilibrium in the Foreign Exchange Market Interest Parity: The Basic Equilibrium Condition The foreign exchange market is in equilibrium when deposits of all currencies offer the same expected rate of return. Interest parity condition The expected returns on deposits of any two currencies are equal when measured in the same currency. It implies that potential holders of foreign currency deposits view them all as equally desirable assets. The expected rates of return are equal when: R$ = R€ + (Ee$/€ - E$/€)/E$/€ (13-2) How Changes in the Current Exchange Rate Affect Expected Returns Depreciation of a country’s currency today lowers the expected domestic currency return on foreign currency deposits. Appreciation of the domestic currency today raises the domestic currency return expected of foreign currency deposits. Equilibrium in the Foreign Exchange Market Table 13-4: Today’s Dollar/Euro Exchange Rate and the Expected Dollar Return on Euro Deposits When Ee$/€ = $1.05 per Euro Equilibrium in the Foreign Exchange Market Figure 13-3: The Relation Between the Current Dollar/Euro Exchange Rate and the Expected Dollar Return on Euro Deposits Expected dollar return on euro deposits, R€ + (Ee$/€ - E$/€)/(E$/€)