• 検索結果がありません。

2009 Foreign Exchange Rate: Theory and Pactice in Action

N/A
N/A
Protected

Academic year: 2018

シェア "2009 Foreign Exchange Rate: Theory and Pactice in Action"

Copied!
22
0
0

読み込み中.... (全文を見る)

全文

(1)

International Finance : Yoshitaka

Kurosawa

1. History of foreign exchange rate

① Foreign Exchange Rate since 1999 ② Yen / US$ exchange rate since 1874

2. Mechanism of Foreign Exchange Transactions

① Transactions in trade, financial assets, and speculations ②   Spot & Future transactions

3. Demand & Supply of Foreign Currency

4. Fixed exchange rate and floating exchange rate 5. Determinants of Foreign Exchange Rates

① short time determinants: Random walk hypothesis

② short and medium term: Interest rate parity hypothesis ③ medium term: Current account hypothesis

④ long term: Purchasing Power Parity hypothesis (PPP)

⑤ interest rate – PPP combined model: Asset Approach model

Determination of Foreign Exchange

Rate

1

(2)

( source ) http://jp.moneycentral. msn.com

1. History of foreign exchange rate

1-① Foreign Exchange Rate since 1999

#: \ depreciated until 2007

#: \ appreciated since 2008

#: $ more depreciated since 2009

#: both Yuan and Won depreciated since 2008, particularly Won

(3)

Depreciated currencies: £ , $, won

Appreciated currencies: Euro, Yuan

All currencies : downward since 2008

3

(4)

Appreciated currencies: Yuan, Real

Depreciated currencies: Rupee, Rouble

(5)

US$  started in 1785

Japanese \ started in 1871 1$= 1\ set in 1874

1874 1$ = 1\

1882( M 15) Bank of Japan

established

1897( M 30) 1$= 2\

1932( S 7) 1$= 3.5\

1940( S1 5) Market closed at 1$= 4.2\

1949( S 24) 1$ = 360\

1971.8: Nixon shock

1971.12: returned to new fixed 1$= 308\

Smithsonian Agreement

1973.2

Floating system

1985. 9 Plaza Accord

1995.4 1$ = 79\ Highest of \

Around 90~100\/$ since 2007

1-② Yen / US$ exchange rate since 1874

5

(6)

2. Mechanism of Foreign Exchange Transactions

2- ① Transactions in (a) foreign trade, (b) financial assets,

and (c) speculations

Designated Dealers

(Tanshi Gyosya)

Bank A Bank B

Bank

of Japan

Exporters(goods)

Investors(financial assets) Importers(goods)

Investors(financial assets)

$ \

+$

\ $

- $

$

\

Interbank Market

$ \

$

\

Intervention

$,Euro

Speculative transactions

(7)

2- ② Spot & Future transactions

\ at present

\ market

\ in the future

$ at present

$ market

$ in the future

Interest rate r %

Interest rate r % Foreign exchange

Spot market

Foreign exchange Future market

E \/$ F \/$

7

(8)

Price of $ = Foreign Exchange Rate (\/$)

(same as apple market = price of an apple)

Volume of D & S 100\

  12 unit

Price of $ = 100 \/ one $ Demand

curve

  10 unit Buy less

3. Demand & supply of Foreign Currency (example:$)

Price of $

120\

Your budget = 1200 \

Supply curve 109\

11 unit

(9)

Volume of D & S Demand

Price of $ (\/$)

Supply

4. Fixed exchange rate and floating exchange rate

fixed rate equilibrium rate

① demand to $ increases

by trade deficit, for example

② $ appreciates, \ depreciates

③ Bank of Japan

must increase supply of $ by selling $

Under fixed system

Under fixed system

A

B

leave the rate at A

intervention if need for change the rate 9

(10)

5. Determinants of Foreign Exchange Rates

5- short time determinants: random walk hypothesis same as molecule movement

factors of movement: announcement by influential person announce of economic statistics, traders action and so on

Izakaya (drinking bar)

suidobashi funabashi

home train

(PPP)

f ( E ) = a + b (basic factors) + u (residual)

a staggering, tipsy walk but not mess

(11)

5- ② short and medium term: interest rate parity hypothesis

\ at present

\ market

\ in the future

$ at present

$ market

$ in the future

Interest rate r %

Interest rate r %

Spot market E \/$ F \/$

The interest rate parity hypothesis

Interest rate parity: r = r* + ( F – E ) / E

E = F / ( 1 + r - r* ) F = E ( 1 + r - r* )

Future market

11

(12)

Invest \1 in Japan : one year later = \1×( 1 + r ) ( = A )

Convert \1 into $ by spot rate E, and invest in USA, but fix it by buying future rate F: One year later in \ = \1 / E ×( 1 + r* ) × F ( = B )

If A is greater than B, more money comes in Japan and r will be lowered If B is greater than A, more money flows into USA and r* will be lowered Therefore, it will soon be \1×( 1 + r ) = \1 / E ×( 1 + r* ) × F

Then, ( 1 +r ) = F / E ( 1 + r* ) Namely, E ( 1 + r ) = F ( 1 + r* )

<<appendix on the interest rate parity: how to reach the equation>>

We change this equation E ( 1 + r ) = F ( 1 + r* ) to a much simpler one: r = r* + ( F – E ) / E Calculation; F ( 1 + r* ) =E ( 1 + r ): F / E = ( 1 + r ) / ( 1 + r*):Multiply (1- r*) both on numerator and denominator: F/E= ( 1 + r)(1 - r* ) / ( 1 + r*)(1 - r* )=(1 + r - r*- rr* ) / (1 - r*^2 ): rr* and r*^2 = nearly zero (0)

F/E= 1 + r - r* : then r = r* + F/E – 1 = r* + ( F – E ) / E

For your reference;2^2=square:2^5=the 5th power of 2 ( 2 to the fifth power, raise 2 to the fifth power ) 2^3=cube The cube of two is eight (raise 2 to the third power):10^2=raise ten to the second power

Conclusion;

interest parity hypothesis:

r = r* + ( F – E ) / E or, r = r* + δE

\ interest rate = $ interest rate + expected change of \/$ (in a year, for instance)

Japan USA expected \/$ change 2% = 6% + - 4% (96\/$-100\/$)/100\/$

(13)

    Quiz

One year interest rate in Japan is now 4% ,

whereas 6 % in the USA .

Foreign exchange rate is 120 \/$ at the spot market.

What exchange rate is supposed to be offered

by banks to customers

as an one year forward (future) exchange rate (F) ?

13

(14)

5- ③ medium term: Current account hypothesis

(flow Approach, elasticity approach, absorption approach)

XXX \/$

Current account (trade account)

surplus

deficit

$ supply

up appreciate\

export down

return to XX \/$

$ demand up

\

depreciate

Export up

return to XX \/$

Current account + Capital account = Foreign reserve

( E, Y, Y* ) ( r - r* ) R

Rather than price & interest rates, E is determined

by a combination of balance of payment

such as economic growth, unemployment,

(15)

5- ④ long term: Purchasing Power Parity (PPP)

● PPP: invented by Gustav Cassel in 1918    

A price of \100 lighter: \100 in Japan, $1 in USA then \100 equals $1 (purchasing power is the same)

Generalization: \100=E ・ $1 (E:coefficient) E=100\/$ (E:exchange rate) If price goes up in Japan from \100 to \110 (price in USA remains $1)

E=\110/$: price of lighter in Japan goes up, \ depreciates (purchasing power of \ declines)

Under fix exchange rate system Under floating rate system

Change \100 for $1 in the market

Go to UA to buy lighters, sell in Japan Demand for lighters in US increases (price goes up)

Supply in Japan increases (price comes down)

“Price” changes

More demand for $ in the market

$ appreciates (\ depreciates)

Up to the same Purchasing power (\110/$)

“Exchange rate”

changes 15

(16)

● Example of calculation by PPP

Formula: E

ppp

= E t0 ×( ΔP t / ΔP t * )

1973 1985

E actual 308\/$ 240\/$

WPI Japan 100 180

WPI USA 100 250

E ppp1985 = 308\/$ ×(180/100)÷(250/100)

= 221\/$

E

real 1985

= E

1985

/ E

ppp

= 240\/$÷221\/$ = 1.086

(17)

● pros and cons on the PPP

Judging from empirical studies,

short-run: rejected(con)

medium-run: some rejected ,

some supported

long-run: mostly supported(pro)

17

(18)

Quiz

In 1974 (right after change to floating), \/$ was 290,

export price index was as the table shows.

In 1983, before the Plaza Accord (1985/9),\/$ rate was 240.

Based on the PPP, how much should have been

the exchange rate in 1983 instead of 240\/$ ?

(base year=1974)

\/$ Japan US

1974 290 138 126

1983 240 146 235

(19)

\/$ exchange rate: Nominal and PPP

PPP Nominal

19

(20)
(21)

21

(22)

参照

関連したドキュメント

Whereas tube voltages and HVLs for these four X-ray units did not significantly change over the 103-week course, the outputs of these four X-ray units increased gradually as

We concluded that the false alarm rate for short term visual memory increases in the elderly, but it decreases when recognition judgments can be made based on familiarity.. Key

Key words: Short Physical Performance Battery, physical performance test, older people receiving long-term care 要旨: 〔目的〕 Short Physical Performance Battery (

The smaller short-term reaction of consumers is also evidenced on price shocks; while the total own price elasticity of beef is -0.24 in the short-term, the total and within meat

In fact, the prey species is increased by its current population shown as ax, where a is a non-negative constant.. Indeed, the term of ax is the birth rate

The proof of Theorem 1.1 was the argument due to Bourgain [3] (see also [6]), where the global well-posedness was shown for the two dimensional nonlinear Schr¨ odinger equation

N aimen , Positive solutions of Kirchhoff type elliptic equations involving a critical Sobolev exponent, NoDEA Nonlinear Differential Equations Appl. Z hang , Sign-changing and

Ogawa, Quantum hypothesis testing and the operational interpretation of the quantum R ´enyi relative entropies,