THE EFFECTS OF EXCHANGE RATE IN INFLATION OUTPUT AND THE CURRENT ACCOUNT ABSTRACT The empirical studies on the effects of changes in exchange rates on inflation and real activity can be broadly divided into four categories: Single-equation econometric methods‚ Vector autoregressive (VAR) models‚ Structural macro econometric models and DSGE models - Dynamic stochastic general equilibrium. Methodologies: First‚ most participants use single-equation econometric methods that estimate
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Congress created the Federal Reserve System‚ which is the central bank‚ on December 23rd‚ 1913; it revolves around 12 Reserve Banks and 7 Board of Governors. The 12 banks the Fed is separated into are not equally divided—they are based on the importance of their financial activities. The role of the Fed in the U.S. economy revolves around monetary policy by purchasing and selling government securities‚ increasing or decreasing the required reserve ratio‚ and using the discount rate. It also focuses on
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The CFO can forecast exchange rates by using either of two approaches‚ fundamental forecasting or technical forecasting. Fundamental forecasting uses trends in economic variables to predict future rates. The data can be plugged into an econometric model or evaluated on a more subjective basis. Technical forecasting uses past trends in exchange rates themselves to spot future trends in rates. Technical forecasters‚ or chartists‚ assume that if current exchange rates reflect all facts in the market
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Federal Reserve Paper Federal Reserve Paper The purpose of this paper is to evaluate the Federal Reserves’ discount rate‚ monetary policy‚ and stimulus program through the money multiplier. What are the factors that would influence the Federal Reserve in adjusting the discount rate? According to Chron if prices rise too fast or the economy starts slowing down‚ the Federal Reserve uses the discount rate as a way of manipulating interest rates to stabilize the economy. This change can either
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EFFECT OF INTEREST RATE ON FOREIGHN EXCHANGE RATE (EVIDENCE FROM ASIAN REGION) ABSTRACT: In this article we investigate the impact of a change in U.S. short term interest rates relative to those in some Asian countries like Bangladesh‚ Thailand‚ Japan‚ Pakistan‚ and China on the bilateral foreign exchange rates between the U.S dollar and each country’s currency. Several factors determine the exchange rate of a country. A higher currency makes a country’s exports more expensive and imports cheaper
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Floating Exchange Rate Exchange rates between currencies have been highly unstable since the collapse of the Bretton Woods system of fixed exchange rates‚ which lasted from 1946 to 1973. Under the "floating" exchange rates‚ since 1973‚ exchange rates are determined by people buying and selling currencies in the foreign-exchange markets . The instability of floating rates has surprised and disappointed many economists and businessmen‚ who had not expected them to create so much uncertainty.
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and future exchange rates. Joseph E. Seagram & Sons imports a year’s supply of French champagne. Payment in euros is due immediately. ANSWER. The euro should appreciate relative to the dollar since demand for euros is rising. b. MCI sells a new stock issue to Alcatel‚ the French telecommunications company. Payment in dollars is due immediately. ANSWER. The spot value of the dollar should increase as Alcatel demands dollars to pay for the new stock issue. The future value of the dollar should decline
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some people have suggested that the Linked Exchange Rate system is the root cause of the situation and that the Hong Kong dollar should no longer be linked to the US dollar. The Financial Secretary already stated in his blog on 14 August that the Link continues to be the most appropriate exchange rate arrangement for Hong Kong. I will elaborate further on a few related issues. Many people who advocate un-pegging the Hong Kong dollar from the US dollar claim that the recent downgrade of the sovereign
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BIDS-PRP WORKING PAPER SERIES Exchange Rate Policy under Floating Regime in Bangladesh An Assessment and Strategic Policy Options Working Paper No. 2 Monzur Hossain * Mansur Ahmed∗∗ October‚ 2009 * Research Fellow‚ Bangladesh Institute of Development Studies (BIDS) ∗∗ Research Associate‚ Bangladesh Institute of Development Studies (BIDS) BIDS-PRP WORKING PAPER SERIES Working Paper No. 2 EXCHANGE RATE POLICY UNDER FLOATING REGIME IN BANGLADESH: AN ASSESSMENT AND STRATEGIC POLICY OPTIONS
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What is the Federal Reserve? The Federal Reserve was created in 1913 in the wake of numerous financial panics that occurred in the United States. It was founded by Congress in order to provide the nation with a safer‚ more flexible‚ and more stable monetary and financial system. Although the Federal Reserve is the most vital asset in maintaining the stability of the U.S. economy‚ not many Americans are familiar with the history and responsibilities of the “Fed”. The Federal Reserve has four main
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