MGCR 382 Lecture 12: IB Lecture 12
9 Mar 2017
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Ib lecture 12 foreign exchange rate determination. Exchange rates: equilibrium: equilibrium: determined in the foreign exchange market at the intersecting of demand and supply of foreign currency. Exchange rates: changes: for example, the demand for canadian goods increases in europe. If the answer is no to both the questions, there is more uncertainty and therefore more volatility. Currency market intervention: foreign currency intervention is the active management manipulation, or intervention in the market"s valuation of a county"s currency, why intervene, fight inflation (strong currency, fight slow economic growth (weak currency) Intervention methods: determined by, magnitude of a country"s economy, magnitude of trading in it"s currency, and, the country"s financial market development, types, direct intervention, indirect intervention, currency controls. Indirect intervention: altering economic or financial fundamentals that are thought to be drivers of capital inflow or outflow of specific currencies: most widely used factor in changes in interest rates. In addition to the three approaches to forecasting discussed earlier (parity conditions,
