Predictability of Foreign Exchange Rates - Dissertation Example

Download file to see previous pages The collapse of the Bretton Woods System of the fixed exchange rates in 1978 ushered in a new era of flexible exchange rates that aimed for the betterment of trade relations between countries. Free and floating exchange rates were assumed to be the solution to the barriers to free trade and hence, the newly acquired ideals of globalization. What remained uncalculated was the instability and lack of predictability associated with flexible exchange rates. In the aftermath of the Global Crisis of 2007, the predictability of exchange rates has evolved as one of the most relevant issues and pleads minute scrutiny and analysis.

I.2 Aims:
The objective of this research is to examine the depreciations, appreciations, and devaluations in the value of the US Dollar relative to other major currencies and based on this analysis; draw a general conclusion on the degree of predictability of exchange rates in recent times. Furthermore, it attempts to identify the main factors responsible for the volatility of exchange rates following the collapse of the Bretton Woods System and thus, offers a clear insight into the various mechanisms existent in the context of exchange rate predictability.

I.3 Objectives:
The main objectives of the research are:
To compare the differences in the stability and predictability of exchange rates before and after the collapse of the Bretton Woods System of fixed Exchange rates.
To study the variations in the value of the exchange rate of the US, concerning other major currencies, and based on this, gauge the relative increase or decrease in the stability and predictability of exchange rates.
To identify the reasons for the changing degree of predictability in exchange rates.

To study the implications of the varying degrees of predictability of exchange rates, in terms of international trade, stability of domestic markets, and other relevant matters.
I.4 Research Questions:

The questions posed in a research paper are of prime importance for obtaining the desired objectives of the research. Whether or not research is being conducted properly depends on whether or not the questions being asked are relevant. If the questions are directly aimed at explaining the key issues of the paper, the research can be depended upon to give precise and accurate results. Thus, the attainment of a balanced and well-justified inference, supported by proper evidence and statistical figures, becomes possible. The research questions given below will help in the process of analyzing the degree of predictability in the international exchange rate market in recent times, by studying the case of variations in the US exchange rate, relative to other countries.

What was the general level of predictability of exchange rates in the pre-era and post-era of the collapse of the Bretton Woods System in 1978? ...Download file to see next pages Read More