上财国际金融系主任金洪飞国际金融课件Chapter-13(1).ppt

Chapter 13 EXCHANGE RATES AND THE FOREIGN EXCHANGE MARKET: AN ASSET APPROACH (汇率与外汇市场：资产分析法） Outline of this chapter Exchange Rates Foreign exchange market Asset approach to exchange rates Interest parity condition Empirical tests Covered interest parity Chapter 13 - Introduction Exchange rates are important because they enable us to translate different countries’ prices into comparable terms. Exchange rates are determined in the same way as other asset prices. The general goal of this chapter is to show: How exchange rates are determined The role of exchange rates in international trade Exchange Rates The (spot) exchange rate (E) is price of one currency in terms of another for immediate trade (on the spot). The conventional way of reporting this in economics (but not in the news) is home currency per unit of foreign. In the U.S. this is $ per unit foreign currency. Example, yesterday E$/€ = 1.04 $/€ Sometimes you will hear quoted the other way around, often called European terms. E.g., 0.96 €/$. Exchange Rates An exchange rate can be quoted in two ways: Direct The price of the foreign currency （外币）in terms of home currency（本币） Indirect The price of domestic currency in terms of the foreign currency Exchange Rates Exchange rates are important for trade because they allow you to compare the cost of imports to that of domestic goods in common terms. Example: You visit New York and see an portable computer for $1000. What is that in RMB? Consider units: you want to convert $ to RMB so you need to multiply by an exchange rate expressed in RMB/$ (check: multiply units and cancel). EUR/USD: Euro exchange rate (2000–2002) ARS/USD: Argentine exchange rate (1995–2002) JPY/USD: Japanese exchange rate (1993–2002) GBP/USD: British exchange rate (since 1776) RMB/USD: Exchange Rate of P. R. China(1981-2003) Appreciations and depreciations(升值和贬值) Our definition of E = home per unit foreign currency Definition can make it confusing to talk about changes in E, called appreci