Exchange traded funds - Research Paper Example

Exchange Traded Funds (ETFs) First M. School Introduction Exchange traded funds (ETFs) are “exchange listed open ended funds backed by a basket of stocks from which they derive their value” (Demaine 354). The number of ETFs has significantly increased commencing from 1995 to date in accordance with the Investment Company Fact Book. In fact, the largest net asset by market was accounted to large cap with more than 200 billion dollars (Ergungor 2). This paper endeavors to depict the Brazilian and United States’ currencies and evaluate the macroeconomic facets in line with their ETFs.

Brazilian Real vs. United States Dollar Brazil In the 2008 economic turmoil, the benchmark Sistema Especial de Liquidacao e Custodia (SELIC) interest percentage hiked up at 13.75, inflation dallied with 7%, and the nation became a network creditor country, which depicted as first on its history (Zwick 40). Historically, from 2006 to the second quarter of 2008, the Brazilian currency exchange rate had dropped from 1.8 to 1.6 and proliferated from 2008 to the middle of 2009 with 1.6 to 1.9. Dismally, from then to the fall of 2009, it slid again to 1.

7, and gradually recovered from 2009-2010 with 1.8 ("Brazilian Real"). United States The United States had a very long drop of its currency rate in line with Brazilian real (BRL) from $2.6 to $1.8. From 2006 to the mid of 2008, its currency rate over Brazilian real had fallen, but a slight staggering movement of increase is evident. Beginning from it, its currency rate had substantially hit a high notch of proliferation, which ended in the fall of 2009. From 2009-2010, there was again a wavering drop of currency rate ("Historical Exchange Rates").

Macroeconomic Analysis on the ETFs The stock market of Brazil from the period span 2006-2008 had become favorable; however, in 2008, there was a staggering locus of ETFs as evaluated and depicted by the benchmark IBovespa stock index. Eventually, it had heavily slithered down to approximately 40,000 from the peak of almost 75,000. From 2006-2008, ETFs were incremental until they gradually fell in 2009. Interest rates in the period 2006-2010 fell from 20% to 8%. The inflation rate commenced at 8% in 2006 and remained steady until 2008 with a wavering movement.

Commencing from 2006-2008, Brazilian GDP had significantly increased but profoundly dropped in 2008 and 2009. However, the GDP had gained confidence to proliferate heavily at 9% in 2010. The unemployment rate staggered from 2006-2010, from 9% to 7% in 2006 and 2010, respectively. Exchange rates subsided from 2006-2008 and gradually recovered in 2009, but in a jiffy, it had quickly slid in 2010 at $1.75. Further, from 2006-2008, industrial production had increased but had thoroughly lost the locus in 2009 and recovered immediately in 2010 (Zwick 41-43).

Moreover, the United States had a proliferating but detrimental employment rate in 2006-2010. In 2006, the state’s unemployment rate was at 5%, and it eventuated to hike at almost 10% in 2010. The real GDP of the United States had a staggering movement from 2006-2008 and straightly recovered in 2009-2010, but it gradually fell again. Within 2006-2010, the net exports had been favorable, specifically during 2008 and 2009. Dismally, in 2010, net export had lost its locus in the market ("Macroeconomic Environment" 17).

Commercial loans were incremental from 2006-2008 but suddenly slid down in 2008 to 2010. The consumer index had a fast pace of proliferation only during 2008-2010 because from 2006 to 2008, the latter had a gradual increase. The average consumer credit was more incremental than the trade and manufacturing loans. The former had a constant increase from 2006-2009 but had slithered in 2010, while the latter had a minimum increase from 2007-2008, and similarly, had slithered in 2010. The industrial production index had slightly increased in 2006-2007; however, it abruptly fell down in 2008 to 2010 ("Macro-Finance Outlook February 2013").

Conclusion Overall, currency rates are primarily an indicator of change in the movement of EFTs. United States would prefer to invest more when Brazil's economy proliferates, and undoubtedly, Brazil embraced such a notion and was visibly depicted throughout its development. However, there came a time when the economic turmoil hovered over all nations of the world, including the United States, which suffers the tremor of the crisis from then and now. Brazil, in 2008, became the center of the world, as it had to stipulate funds for international bounds and frontiers, leading them to dominate the credit system of the world as per time.

As a conclusion, the effective spending of Brazil over any nation with its ETFs became its salient and powerful tool to evade the economic turmoil of 2008 and become the centric financial system of the world. Works Cited "Brazilian Real." Trading Economics. Trading Economics, 2013. Web. 20 Feb. 2013 . Demaine, John. “Exchange Traded Funds for the Sophisticated Investor.” Derivatives Use, Trading & Regulation 7.4 (2002): 354-61. Print. Ergungor, O. Emre. “Exchange-Traded Funds.” Economic Commentary 2012.5 (2012): 1-4. Print. "Historical Exchange Rates.

" Oanda Corporation. Oanda, 2013. Web. 20 Feb. 2013 . "Macroeconomic Environment." U.S. Department of the Treasury. Treasury Government, n.d. Web. 20 Feb. 2013 . "Macro-Finance Outlook February 2013." Washburn University. Applied Portfolio Management Macroeconomic Analysis and Forecast, 2013. Web. 20 Feb. 2013 . Zwick, Steve. “Navigating the Choppy Waters of Brazil.” Future: News, Analysis & Strategies for Futures & Derivatives Traders 41.9 (2012): 40-43. Print.