The document discusses the relationship between exchange rates and macroeconomic variables. It uses data from Australia, the US, and Germany over 10 years to test 5 regression models linking exchange rates to variables like interest rates, inflation, GDP, and more. The best model is Model B, which indicates that most macroeconomic variables significantly influence exchange rates, except for employment and budget deficit. However, the results show relationships that are opposite of what is theoretically expected, suggesting that psychological factors like investor confidence may dominate over economic variables in impacting exchange rate fluctuations for stable economies.
Gary Trennepohl on "Decoding Financial Statements" at Reynolds Business Journalism Week, Jan. 6, 2011.
For more information, please visit businessjournalism.org
Gary Trennepohl on "Decoding Financial Statements" at Reynolds Business Journalism Week, Jan. 6, 2011.
For more information, please visit businessjournalism.org
The ppt gives a description of how different theories define working of forex market. ?
when & where do these theories fail?
What is the impact of macro-economic factors like inflation, unemployment etc on forex exchange.?
A nicely formatted presentation.
What are the different types of forex market?
In this paper we evaluate critically the popular Mundell-Fleming model from the standpoint the exogenous interest rate heterodox approach. We criticize the assumptions of exogenous money supply, "perfect" international capital markets and inelastic exchange rate expectations. We show that in a more realistic framework none of the main results of the Mundell-Fleming model on the relative effectiveness of fiscal and monetary policies are valid, either in floating and fixed exchange rate regimes. We conclude that ,within certain very asymmetric bounds, the central bank has the power to determine the domestic interest rate exogenously even in open economy with free capital mobility and that there is no automatic market mechanism to ensure the automatic adjustment of the interest rate and exchange rate to sustainable levels.
Long Run Impact of Exchange Rate on Nigeria’s Industrial Outputiosrjce
While many scholars have carried out a lot of research on the impact of exchange rate volatility and
price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for
Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and
industrial output. The economies of all the countries of the world are linked directly or indirectly through asset
and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign
currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the
growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates
can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal
exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of
inflation and maintenance of external competiveness. This study employed the use of the ordinary least square
technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time
series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment,
population growth rate, and real exchange rate were significant determinants of industrial output. The changes
in external balance and inflation were of little or no consequences to industrial output. Based on the findings,
the researcher recommended that conscious efforts should be made by government to fine-tune the various
macroeconomic variables in order to provide an enabling environment that stimulates industrial output and
eventual economic growth.
The ppt gives a description of how different theories define working of forex market. ?
when & where do these theories fail?
What is the impact of macro-economic factors like inflation, unemployment etc on forex exchange.?
A nicely formatted presentation.
What are the different types of forex market?
In this paper we evaluate critically the popular Mundell-Fleming model from the standpoint the exogenous interest rate heterodox approach. We criticize the assumptions of exogenous money supply, "perfect" international capital markets and inelastic exchange rate expectations. We show that in a more realistic framework none of the main results of the Mundell-Fleming model on the relative effectiveness of fiscal and monetary policies are valid, either in floating and fixed exchange rate regimes. We conclude that ,within certain very asymmetric bounds, the central bank has the power to determine the domestic interest rate exogenously even in open economy with free capital mobility and that there is no automatic market mechanism to ensure the automatic adjustment of the interest rate and exchange rate to sustainable levels.
Long Run Impact of Exchange Rate on Nigeria’s Industrial Outputiosrjce
While many scholars have carried out a lot of research on the impact of exchange rate volatility and
price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for
Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and
industrial output. The economies of all the countries of the world are linked directly or indirectly through asset
and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign
currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the
growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates
can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal
exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of
inflation and maintenance of external competiveness. This study employed the use of the ordinary least square
technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time
series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment,
population growth rate, and real exchange rate were significant determinants of industrial output. The changes
in external balance and inflation were of little or no consequences to industrial output. Based on the findings,
the researcher recommended that conscious efforts should be made by government to fine-tune the various
macroeconomic variables in order to provide an enabling environment that stimulates industrial output and
eventual economic growth.
1Practice with simple calculations related to Fiscal Polic.docxeugeniadean34240
1
Practice with simple calculations related to Fiscal Policy:
Question 1: According to Paul Krugman, the complex multiplier for the United States is about equal to 2. The American Recovery and Reinvestment Act of 2009 earmarked $787B in deficit spending, of which $330.4B was spent in 2009. (Total government deficits for 2009 were $1251.7B.) The increase in nominal GDP from 2009 to 2010 was $541.2B (3.8%). If we assume that this growth resulted from the ARRA stimulus package, what was the implied multiplier associated with the stimulus package?
Question 2: Look at disposable income, personal consumption and personal savings. What was the personal savings rate in the United States in 2011? (Use savings/disposable income, i.e. Average Propensity to Save.)
Question 3: What proportion of GDP was our federal government sector in 2010? (Divide federal government spending by GDP.) Per dollar of government spending, how much government spending was financed by government debt (negative savings) in 2010 at the federal level? (Divide negative federal government savings by federal government expenditure.)
Question 41: One popularly reported statistic for national economies is the Debt/GDP ratio. Total US Federal Debt in 2010 was $13.562 Trillion. What was our Debt/GDP ratio in 2010?
Question 5: Refer to Graph Set #2, the first picture entitled “Eurostat News Release.” How does the EU compare in the size of its public sector? (What percentage of GDP is government spending?) Are its government deficits larger or smaller than those of the US as a percentage of GDP in 2009?
Question 6: Government stimulus can take the form of increased spending or reduced taxes, or both. It creates government debt in both cases, but that debt affects the larger economy by different pathways. Can you answer each the following questions in one short sentence?
· The government increases spending without increasing taxes, and a deficit is generated:
· Where does the money to finance the deficit come from?
· How does this affect affordable credit for Investment and Consumption?
· How does it affect National Incomes? Who is the government paying money to when they make an expenditure?
· The government decreases taxes without decreasing spending, and a deficit is generated:
· Where does the money to finance the deficit come from?
· How does this affect affordable credit for Investment and Consumption?
· How does it affect personal savings rates (if personal taxes are lower)? How does it affect business savings rates, i.e. retained earnings, if profits taxes are lowered? How does it affect the cost of borrowed funds for businesses?
Monte-Carlo Option Pricing
This exercise uses observation that an option price can be calculated as a discounted risk-neutral expectation.
Context
This observation suggests that we could value an option by sampling many thousands, say, of possible asset prices, at , calculating the payoffs, taking their expected value and discounting th.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
4. Abstract
Exchange rates play a significant role in international trade not only in fixing the
prices but also in determining the nature of hedging to be arranged to avoid
exchange rate risks. In this article used three countries yearly exchange rates with
their macroeconomic variables such as relative interest rates etc. to study the
impact they exert on exchange rates.
Multi models have been applied by linking complementary variables to identify
the best model. The results showed that model B was robust which indicated all
macroeconomic variables significantly influenced the exchange rates except
employment and budget deficit. Most of the macroeconomic variables showed
opposite sign contrary to the expectations and we concluded that the
psychological factors like investor confidence dominate over economic variables
in deciding exchange rate fluctuation.
5. Introduction
Exchange rate fluctuation is defined as the risk associated with unpredicted
movements in exchange rate. Macroeconomic variables such as interest rate,
inflation rate, the balance of payments, tax rate etc. influence the exchange
rate randomly. These macroeconomic variables are unstable and volatile
depending on the state of the economy prevailing in their countries.
In addition increased cross border currency flows due to foreign direct
investment and service like banking, insurance, education, tourism cause the
exchange rate fluctuate randomly.
The role of exchange rate in imports and exports is crucial. In addition a
country’s overall economic performance is reflected by exchange rate .
6. Introduction(cont.….)
Macroeconomic variables prevail in home and host countries determine
the exchange rate equilibrium in long-run. Short-run fluctuations are
temporary caused by arrival of economic information from time to time
from home and host countries.
Fluctuations of exchange rate have significant impact on countries’
import and export behavior and ultimately culminate in current account
balance and foreign currency reserves held by the central banks.
7. Introduction(cont.….)
Exchange rate not only influences imports, exports and direct
investments but also several service sectors like banking, insurance,
education, tourism.
The Asian economic crisis caused by currency depreciation in the
late 90s and the recent sub-prime loan crisis of 2008 eroded not
only market capitalization of companies but also severely strained
the national economies.
8. Exchange rate & Macro economic
Variables
Home and host countries’ interest rates play a significant role in
exchange rate determination. The interest rates are adjusted
quarterly by the central bank as part economic management. If
inflationary pressure prevails in the country, the central bank will
increase base lending rate to curtail the money supply among the
people and companies to make borrowings expensive.
If both home and host countries simultaneously increase or
decrease the interest rates matching, then there will be no effect on
exchange rate due to interest rate.
9. Exchange rate & Macro economic
Variables (Cont.….)
The increase in the general price level of goods and services in an economy is
inflation, measured by the Consumer Price Index. In other words price raise is
inflation and the same is depreciation of home currency in international parlance.
When the home inflation rate is high the home currency will lose value and vice
versa. Inflation and exchange rate are negatively correlated. A country with lower
inflation exhibits a rising currency value and vice versa.
A deficit in the balance of payment shows the country is spending more on foreign
trade than it is earning, and that it is borrowing capital from foreign sources to make
up the deficit. The excess demand for foreign currency lowers the country's
exchange rate until domestic goods and services are cheap enough for foreigners,
and foreign assets are too expensive to generate sales for domestic interests.
10. Exchange rate & Macro economic
Variables (Cont.….)
Relationship between the employment rate and exchange rate is unclear because
the employment rate can be quantified in several ways. Underemployment issue is
a challenge that could not be quantified with accuracy.
If the home currency depreciates there will be an increased demand for home
country’s goods in foreign countries which leads to more production in home
country and thus leads to more employment and vice versa.
11. Methodology
This study investigates nine important macroeconomic variables’
relationship and their influence on exchange rates. Regression modeling
technique is widely applied to estimate coefficients for independent
variables, to test hypotheses and to evaluate the importance of each
independent variable in the model. Following theoretical model to assess
the importance macroeconomic variables.
𝑦 = 𝑎 +𝛽𝑖𝑥𝑖 + … + 𝛽𝑛𝑥𝑛 +𝜀 , 𝑖 = 1,…,𝑛.
12. Methodology (Cont......)
Where
y = Exchange rate
a = Intercept
β= Regression coefficient to be estimated
x = Independent variable
i = List of independent variables
x1=Relative interest rates
x2=Relative inflation rate
x3=Relative balance of payments
x4=Relative employment rate
x5=Relative corruption index
x6=Relative gross domestic product
x7=Relative deficit/surplus rate
x8=Relative tax rate
x9=Relative borrowing rate
13. Methodology (Cont......)
These variables are closely linked and complementary and therefore a multi
modeling technique is adopted to clearly see the effect of these variables by linking
them as follows.
Model A will be the traditional model which will include all the nine variables
together
Model B will link the GDP and budget deficit as they are complementary
Model C will link the GDP, budget deficit and tax rate
Model D will link the GDP, budget deficit, tax rate and borrowing
Model E will link the GDP, budget deficit, tax rate and inflation
14. Data
To test the above models exchange rates AUD/USD, Euro/USD, AUD/Euro are
considered. These XRs are considered because United States, Australia and Germany
(representative for Euro) are strong economies with minimum unemployment, less
corrupt and lesser deficit in their budgets. These counties faced the recent global
economic crisis more or less on the same level. Data regarding the macroeconomic
variables were collected from the central banks of respective countries. Annual data
was collected for ten years which yielded only 30 data samples. Hence to augment
the sample size the data is bootstrapped to 200. This is acceptable because for most
of the economic variables the data is published annually.
18. Results & Discussion (Cont.…..)
Unstandardized S.E. C.R. Sig. Label Standardized R Square
Interest -0.339 0.070 -4.825 *** a -0.349 0.946
Inflation 0.022 0.008 2.851 0.004 b 0.150
BOP -0.088 0.026 -3.388 *** c -0.273
Employment rate -0.535 0.466 -1.148 0.251 d -0.072
Corruption -1.684 0.424 -3.976 *** e -0.278
GDP 0.020 0.277 0.071 0.943 f 0.022
Deficit/Surplus 0.008 0.008 0.940 0.347 g 0.048
Tax 0.399 0.180 2.213 0.027 h 0.328
Borrowing -1.315 0.350 -3.756 *** i -1.118
TABLE II: REGRESSION ESTIMATES OF MODELA
19. Results & Discussion (Cont.…..)
Unstandardized S.E. C.R. Sig. Label Standardized R Square
Interest -0.340 0.068 -4.972 *** a -0.350 0.946
Inflation 0.022 0.008 2.870 0.004 b 0.150
BOP -0.088 0.026 -3.442 *** c -0.273
Employment rate -0.541 0.450 -1.202 0.229 d -0.073
Corruption -1.692 0.388 -4.363 *** e -0.279
GDP 0.008 0.008 0.941 0.346 f 0.009
Deficit/Surplus 0.008 0.008 0.941 0.346 f 0.048
Tax 0.397 0.176 2.26 0.024 h 0.326
Borrowing -1.303 0.206 -6.310 *** i -1.108
TABLE III: REGRESSION ESTIMATES OF MODEL B
20. Results & Discussion (Cont.…..)
Unstandardized S.E. C.R. Sig. Label Standardized R Square
Interest -0.311 0.073 -4.273 *** a -0.320 0.937
Inflation 0.016 0.008 1.998 0.046 b 0.104
BOP -0.123 0.022 -5.566 *** c -0.380
Employment rate -0.315 0.475 -0.664 0.507 d -0.042
Corruption -1.906 0.407 -4.681 *** e -0.315
GDP 0.002 0.009 0.242 0.809 f 0.002
Borrowing -1.700 0.116 -14.668 *** i -1.446
TABLE IV: REGRESSION ESTIMATES OF MODEL C
21. Results & Discussion (Cont.…..)
Unstandardized S.E. C.R. Sig. Label Standardized R Square
Interest 0.311 0.175 1.776 0.076 a 0.321 0.456
Inflation 0.054 0.022 2.494 0.013 b 0.361
BOP 0.019 0.058 0.331 0.740 c 0.060
Employment rate 2.082 1.314 1.584 0.113 d 0.280
Corruption -0.261 1.153 -0.226 0.821 e -0.043
GDP 0.021 0.025 0.845 0.398 f 0.023
TABLE V: REGRESSION ESTIMATES OF MODEL D
22. Results & Discussion (Cont.…..)
Unstandardized S.E. C.R. Sig. Label Standardized R Square
Interest 0.311 0.178 1.746 0.081 a 0.321 0.436
Inflation 0.040 0.017 2.350 0.019 b 0.267
BOP 0.019 0.060 0.327 0.744 c 0.060
Employment rate 1.958 1.332 1.470 0.142 d 0.263
Corruption 0.008 1.142 0.007 0.995 e 0.001
GDP 0.040 0.017 2.350 0.019 f 0.044
TABLE VI: REGRESSION ESTIMATES OF MODEL E
23. Results & Discussion (Cont.…..)
Model CMIN DF P CMIN/DF RMSEA AIC BCC
Model A - - - - - 110.000 177.222
Model B 0.002 1 0.966 0.002 0.000 108.002 174.002
Model C 4.670 2 0.097 2.335 0.215 110.670 175.448
Model D 67.221 3 - 22.407 0.859 171.221 234.777
Model E 68.244 4 - 17.061 0.744 170.244 232.577
TABLE VII: FIT INDICES OF DIFFERENT MODELS
24. Conclusion
In this research three economically sound relatively less unemployment and less corrupt countries XRs are chosen
to investigate. Interestingly many variables show the opposite relationships. For instance, interest rate, BOP and
inflation rates should influence the exchange rate positively as per theory but the results show the opposite. We
interpret this as true for these reasons:
Firstly the currency values of these countries are fairly stronger, the strength comes from confidence of public and
investors and not from economic variable prevailing in these countries.
Secondly the independent variables have complex interrelationships and interactions among themselves which
may not be captured by a weak traditional regression model.
Thirdly these countries’ economies are fairly corrupt free, stable in interest rates and least unemployment rates
prevail, hence the model gives diametrically opposite results. This may be due to the inclusion of macroeconomic
variables ignoring the psychological factor which is the confidence of investors and traders on the performance or
stability of these economies.
