For example, in flexible exchange rate administration, the governments locate their money supplies and allow the exchange rates liberally adjust according to the ensuing ratio of the two money supplies…
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However, the opposite happens in fixed rate regime.
Furthermore, in fixed exchange rate the price of one currency is permanent comparative to all other currencies by state authority. However, in flexible or the floating exchange rate system, the value of a currency is permitted to vary in reaction to the forces in the market. Alternatively, under the fixed exchange rates, expansion of money reduces interest rates thus leading to outflows of capital. The eventual loss in coffers lowers the money supply (Jones & Lumby, 2003).
On the flip side, under the flexible regime the exchange rate is depreciated by the capital outflow resulting to a stimulated output (Mukherjee, 2007). Finally, under the fixed exchange rate, positive demand increases interest rates and provokes an inflow of capital that balances the loss of the coffers through deficit of trade. In contrast, under the floating rates the inflow of capital appraises the exchange
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From the period of 2004 to March 3, 2012, Yuan appreciated by more than 23% and fluctuated between 8.2800 to 6.3039. The following graph shows us that condition of Yuan between 2004 and 2012. Figure 1: China’s exchange rate appreciation and Dollar’s Depreciation Source: Google Finance, 2012 The fluctuation can be divided into the following important periods: Figure 2: Important USD/CNY Fluctuation Date Source: Google Finance, 2012 China follows the policy of managed exchange rates.
The trends for the foreign exchange indicate that XJP lost 60 million Renminbi in 2003 and other 70 million in 2004 (Moffett, Stonehill & Eiteman, 2008, p. 253). Foreign exchange gains and losses have a significant impact for XJP’s corporate performance, since it fully depends on how the foreign currencies behave towards each other to make its profits or suffer losses.
Based on Haynes and Stone (1981), this assumption could lead to uncertainties and problems.
Univariate Time Series Models - Long AR (Auto regression), Schwartz (1978) order selection criterion, Akaike (1974) procedure, Wiener-Kolmogorov prediction formula in the frequency domain, Random Walk model.(1.
Another essential element that can be an indicator of a country's economic health is their exchange rates. Exchange rates compare the currency of one country to that of another. There are many ways in which the exchange rates can affect an economy. Understanding how exchange rates and balance of payments are linked is important to understanding how a country's economy interacts with that of other countries around the world.
For this purpose, a range of data was utilised from books, journal articles and the Internet resources. The paper presents an insightful study on the impact of various factors on exchange rates such as monetary policy, inflation, imports and exports, government spending, economic productivity and foreign reserve etc by utilising the research and studies conducted by different scholars [(Krueger, 1983), (Rodriguez, 1977), (Diulio, 1998), (Stockman, 1980) etc].
It is however, important to note that the rates at which a foreign currency will be exchanged with local currency is mostly determined by the external forces, organizations therefore may have to incur losses too due to fluctuations in the foreign exchange rates. Foreign
In a nutshell, an exchange rate refers to the price in one nation’s currency of one unit of another nation’s currency. Ever since the collapse of the Bretton Woods regime (soft peg) in the 1970’s, economists have never concluded the debate whether fixed or floating exchange rates are preferable.
The import from Thailand will be cheaper but their exports could potentially lose value in Thailand market.
Unfavorable economic conditions are caused by high inflation and high interest rates in the economic.