What Determines Exchange Rates?

# 第19章 What Determines Exchange Rates?

## 章节概览
What Determines Exchange Rates? Since the general shift to floating exchange rates in the early 1970s, exchange rates between the U.S. dollar and other major currencies have been variable or volatile. The charts at the beginning of the chapter suggest three types of variability. First, there are long-term trends in which some currencies tend to appreciate against the dollar, and others tend to depreciate. Second, there are medium-term trends which are sometimes counter to the longer trends.

## 知识点
### 1. A Road Map
- 教学说明：What Determines Exchange Rates?
- 支撑要点：What Determines Exchange Rates?
- 来源类型：manual

### 2. Exchange Rates in the Short Run
- 教学说明：Since the general shift to floating exchange rates in the early 1970s, exchange rates between the U.S. dollar and other major currencies have been variable or volatile. The charts at the beginning of the chapter suggest three types of variability. First, there are long-term trends in which some currencies tend to appreciate against the dollar, and others tend to depreciate.
- 支撑要点：Pressures on exchange rates in the short run can be best understood in terms of the demands and supplies of assets denominated in different currencies
- 支撑要点：Foreign exchange markets seems sensitive to movements in interest rates
- 支撑要点：Expectations of future exchange rates can have a powerful impact on international financial positioning, and thus on the value of the current exchange rate
- 来源类型：manual

### 3. The Long Run: The Monetary Approach
- 教学说明：Combining PPP and the quantity theory equations for two countries, we obtain a basis for the monetary approach to explaining or predicting exchange rates in the long run: e = P/Pf = (Ms/Msf)(kf /k)(Yf /Y). If the ratio of the k's is steady, then the exchange rate will change over the long run as the money supplies change and as real GDPs grow, with elasticities of one.
- 支撑要点：Emphasizes the importance of money supplies and demands as keys to understanding the determinants of exchange rates, through the link of money to price levels and inflation rates.
- 支撑要点：The exchange-rate value of a foreign currency (
- 支撑要点：) is raised in the long run by the following:
- 来源类型：manual

### 4. The Long Run: Purchasing Power Parity (PPP)
- 教学说明：The chapter then examines long trends in exchange rates. Our understanding of exchange rates in the long run is based on the purchasing power parity (PPP) hypothesis. Three versions of PPP are presented: the law of one price for a single product, absolute PPP, and relative PPP.
- 支撑要点：Exchange rates over time
- 支撑要点：Long-term trends
- 支撑要点：Medium-term trends
- 来源类型：manual

### 5. Exchange-Rate Overshooting
- 教学说明：During class discussion of the short-run pressures on exchange rates, inquisitive students may ask if both the interest rate (say, the domestic interest rate) and the expected future spot exchange rate change at the same time. Here is one possible way to respond. If the increase in the nominal domestic interest rate is caused by a higher expected rate of inflation, then it may also be accompanied by an expectation (based on PPP) that the domestic currency will depreciate in the future.
- 支撑要点：International investors can react
- 支撑要点：rationally
- 支撑要点：to news by driving the exchange rate
- 来源类型：manual

### 6. How Well Can We Predict Exchange Rates?
- 教学说明：The chapter next discusses how difficult it is to predict exchange rate movements in the short run. Generally, economic models (like the asset market approach or the monetary approach) cannot beat the naive model of a random walk, which predicts that the exchange rate in the future will simply be the same as the exchange rate today.
- 支撑要点：The naïve model: the spot exchange rate follows a
- 支撑要点：random walk
- 支撑要点：, so we have no ability to predict whether it will go up or down
- 来源类型：manual

### 7. Introduction
- 教学说明：What Determines Exchange Rates?
- 支撑要点：Exchange rates over time
- 支撑要点：Long-term trends
- 支撑要点：Medium-term trends
- 来源类型：manual

### 8. Asset Market Approach to Exchange Rates
- 教学说明：The chapter first examines short-run movements in exchange rates. It presents the version of the asset market approach to exchange rates that focuses on debt securities and the uncovered interest parity relationship developed in Chapter 18, presuming that this relationship holds approximately if not exactly. The basic discussion examines the pressure on the current spot exchange rate if one of the other three rates (the domestic interest rate, the foreign interest rate, and the expected future spot exchange rate) changes, with the other two held constant.
- 支撑要点：Exchange rates over time
- 支撑要点：Long-term trends
- 支撑要点：Medium-term trends
- 来源类型：manual

## 案例
### 案例 1: 2.Calculate and report the real bilateral exchange rate values (annual a ...
2.Calculate and report the real bilateral exchange rate values (annual averages) of your country's currency since 1990, relative to the U.S. dollar. If possible, use price indexes called “Producer Prices,” “Wholesale Prices,” or a similar name, even if the names are somewhat different between your country and the United States.

### 案例 2: Price Gaps and International Income Comparisons: The list of countries i ...
Price Gaps and International Income Comparisons: The list of countries is ordered by national income per capita using common prices (sometimes called national income per capita at PPP exchange rates), as shown in the middle column of numbers. Singapore is at the top of the list because it has the highest value for this common-price income per capita.

### 案例 3: 11. a.If we use 1995 as the base year, the nominal ...
11. a.If we use 1995 as the base year, the nominal exchange rate of $1/pnut corresponds to a ratio of U.S. prices to Pugelovian prices of 100/100. According to PPP, this relationship should be maintained over time. If the price level ratio changes to 260/390 in 2018, then the nominal exchange rate should change to $0.67/pnut.

### 案例 4: b.For the United States, the quantity theory of money with a ...
b.For the United States, the quantity theory of money with a constant k means that the quantity equation with k = 0.25 should hold in 2018: 65,000 = 0.25 260 1,000. It does. Because the quantity equation holds for both years with the same k, the change in the price level from 1995 to 2018 is consistent with the quantity theory of money with a constant k.

## 习题
### 题目 1
The ________ approach to exchange rates emphasizes the role of portfolio repositioning by international financial investors.
- A) elasticity
- B) asset market
- C) monetary
- D) balance-of-payments

### 题目 2
The asset market approach to exchange rate determination seeks to predict
- A) the forward exchange rate premiums.
- B) the long-run trends in exchange rates.
- C) the possibility of retaining a pegged exchange rate by the government.
- D) the short-term pressures on exchange rates.

### 题目 3
The exchange rate value of a foreign currency is ________ in the short run by a rise in its expected future spot exchange rate value.
- A) raised
- B) lowered
- C) made volatile
- D) not affected

### 题目 4
A decrease in the foreign interest rate relative to the domestic interest rate ________ the exchange rate value of a foreign currency in the short run.
- A) raises
- B) lowers
- C) does not affect
- D) causes fluctuations in

### 题目 5
Other things equal, a broad shift to expecting depreciation of the euro will lead to
- A) an inflow of capital to Europe.
- B) an increase in official exchange market intervention by the euro area monetary authorities.
- C) a lowering of exports of European goods and services.
- D) a decrease in the demand for euro-denominated financial assets.

### 题目 6
If the domestic interest rate decreases, with the foreign interest rate and the expected future spot rate remaining unchanged, the value of the domestic currency vis-à-vis the foreign currency is expected to
- A) increase.
- B) decrease.
- C) remain unchanged.
- D) converge to its purchasing power parity (PPP) value.

### 题目 7
If the expected future spot exchange rate value of the foreign currency decreases, with the interest rate differential unchanged, the current spot exchange-rate value of the domestic currency
- A) increases.
- B) decreases.
- C) remains unchanged.
- D) overshoots.

### 题目 8
Which of the following statements is true?
- A) If the domestic interest rate rises, there will be international financial repositioning toward domestic-currency assets, thereby causing the domestic currency to appreciate.
- B) If the expected future spot exchange rate value of the foreign currency decreases, there will be international financial repositioning toward foreign-currency assets, thereby causing the domestic currency to depreciate.
- C) If foreign interest rates increase, the domestic interest rate remaining unchanged, there will be international financial repositioning toward domestic-currency assets and the domestic currency will appreciate.
- D) If the expected future spot dollar per euro exchange rate increases, there will be international financial repositioning toward the dollar-denominated assets thereby causing the euro to depreciate.

## 参考答案
- 题目 1: 答案：B | 选项内容：asset market | Topic：A Road Map | Difficulty：1 Easy
- 题目 2: 答案：D | 选项内容：the short-term pressures on exchange rates. | Topic：A Road Map | Difficulty：1 Easy
- 题目 3: 答案：A | 选项内容：raised | Topic：Exchange Rates in the Short Run | Difficulty：1 Easy
- 题目 4: 答案：B | 选项内容：lowers | Topic：Exchange Rates in the Short Run | Difficulty：1 Easy
- 题目 5: 答案：D | 选项内容：a decrease in the demand for euro-denominated financial assets. | Topic：Exchange Rates in the Short Run | Difficulty：1 Easy
- 题目 6: 答案：B | 选项内容：decrease. | Topic：Exchange Rates in the Short Run | Difficulty：2 Medium
- 题目 7: 答案：A | 选项内容：increases. | Topic：Exchange Rates in the Short Run | Difficulty：2 Medium
- 题目 8: 答案：A | 选项内容：If the domestic interest rate rises, there will be international financial repositioning toward domestic-currency assets, thereby causing the domestic currency to appreciate. | Topic：Exchange Rates in the Short Run | Difficulty：2 Medium

## AI / NextLab 使用建议
- Mundell Trilemma Lab：将《What Determines Exchange Rates?》对应的理论或政策机制放到贸易分析实验室中做交互式验证。 https://digitconnection.ai/nextlab/