StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Effect of the exchange rates and inflation on the investment - Statistics Project Example

Comments (0) Cite this document
Summary
The major objective of this paper “Effect of the exchange rates and inflation on the investment” is to make use of relative form of Purchasing Power Parity in acknowledging whether the prices levels of any fixed basket of products are equal to the Exchange Rate…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.4% of users find it useful
Effect of the exchange rates and inflation on the investment
Read TextPreview

Extract of sample "Effect of the exchange rates and inflation on the investment"

Download file to see previous pages Further, the use of PPP will help in determining the effect of inflation rates on exchange rates in each of the two countries. The knowledge about the inflation rate will conclusively lead to comparison of the intensity of investment between the countries. Accessing the relationship between exchange rates, interest rates and inflation is essential in understanding the intensity of investment. The necessity of PPP theory in this project arises because it acknowledges the changing patterns of trade usually witnessed between two countries as the result of the difference in inflation rates. In order to achieve the objective of the project, the baseline is to analyse the change of exchange rates between UK and USA through testing the PPP theory. Data given for the quarter period will be used in performing regression in Minitab thereby giving information on the differences about the exchange rates. Intuitively, the basis of this project is that absolute form of PPP cannot be used because it does not acknowledge the differences in prices thereby calling for the use of relative form. The project involves testing the relevance of PPP theory through a real life situation comparison of the exchange rate and inflation rate between UK (pound) and US (dollar) for the period of 10 years quarterly (from 2000 to 2009). Success in carrying out this test calls for perusing through the EIU database. In this case, US and UK were selected as the subjects for comparison followed by acknowledging the period of time as from 2000 to 2009. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Effect of the exchange rates and inflation on the investment Statistics Project”, n.d.)
Effect of the exchange rates and inflation on the investment Statistics Project. Retrieved from https://studentshare.org/management/1638524-central-question-how-does-inflation-and-exchange-rate-affect-the-balance-of-payment-between-uk-and-usa
(Effect of the Exchange Rates and Inflation on the Investment Statistics Project)
Effect of the Exchange Rates and Inflation on the Investment Statistics Project. https://studentshare.org/management/1638524-central-question-how-does-inflation-and-exchange-rate-affect-the-balance-of-payment-between-uk-and-usa.
“Effect of the Exchange Rates and Inflation on the Investment Statistics Project”, n.d. https://studentshare.org/management/1638524-central-question-how-does-inflation-and-exchange-rate-affect-the-balance-of-payment-between-uk-and-usa.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Effect of the exchange rates and inflation on the investment

USD/CNY: Exchange Rates

...conditions. The exchange rate moved from 6.83 to 6.35. This was a movement of around 7.6% in the exchange USD/CNY exchange rate market. There are number of factors that can be attributed to the changes in the USD/CNY exchange rate market. These movements do not occur only because the government wanted to change the way it operated the currency market, but these changes occurred due to a lot of economic factors such as Balance of Payment, Inflation in the economy and to provide relief to the people of China. The first reason why the Chinese authorities allowed the USD/CNY to appreciate is because of the...
8 Pages(2000 words)Essay

Economics of exchange rates

...for their supplies and materials locally and pay for them using the local currency. This goes a long way in mitigating the risks of dealing with payments in foreign currency, where the business is exposed to the risks of exchange rate fluctuations, and left at the mercy of the foreign markets operations (Sarno & Taylor, 2005, p. 88). Therefore, the situation of XJP is different, since its performance is fully dependent on the operations of the foreign markets and the fluctuations of the foreign currency exchange rates. This prevents it from planning for its profits growth effectively. Case Question 3: The relationship between these forms of...
4 Pages(1000 words)Essay

International Financial Markets: Exchange Rates and Inflation

..., importers with foreign currency debt fear an appreciation of currency. It is advisable for such importers to purchase forwards and neutralize the risk of foreign exchange. Similarly, companies employ foreign currencies as an option to hedging in forward and money markets Kavaliova (2007, 145). It is advisable for investors to implement a zero-cost option strategy to manage risk of exchange rate. The external hedging can have beneficial effects on investment regardless on the rate of inflation. In addition, it enables investors to evaluate risks of their investment in international markets. Internal...
8 Pages(2000 words)Coursework

Growth rates and inflation rate

...? 19th November Growth rates and the inflation rate As the global economy improves based on the increased demand for products as a result of increase in population, many countries have taken initiatives to curb inflation that can have negative implications on the purchasing power of the consumers. Inflation entails an increase in the prices of basic commodities within a specified period of time. By the use consumer price index, the key tool of measuring inflation, economists are able to initiate effective microeconomic policies to mitigate the implications of inflation. On the other hand, growth...
3 Pages(750 words)Essay

Dispersion of Inflation Rates

..., and of capital. Such mobility limits the degree to which prices, wages, and interest rates can differ in different countries. It also limits the degree to which their changes may diverge, an effect that is more relevant to the transmission of inflation. It is often said that the world economy has become more integrated as a result of reductions in the barriers to international movement of goods, labor, and capital (Mishkin 89). One of the influences affecting not only the degree but the direction in which prices of nontradable output are influenced is monetary policy. If it is sufficiently restraining, it may force compensating decreases in prices of nontradable goods. The fact that...
7 Pages(1750 words)Essay

Exchange Rates

...Exchange Rates Task: Exchange Rates There are several differences between flexible and fixed exchange rates. 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. However, in a fixed rate administration, one of the two nations, with the agreement of the other, situates the exchange rate and allows its money distribution to adjust to suit to the level needed (Barro, 2008)....
1 Pages(250 words)Essay

Foreign Exchange Rates and Exchange Rate Risk

...Introduction International firms which trade globally has to deal in foreign currencies as international trade mostly takes place either in US $ or Euros. International transactions therefore are not incurred in the local currency of the organization and hence firm has to rely on foreign currency. 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 exchange rates in international market are determined by the demand and...
4 Pages(1000 words)Essay

Exchange Rates

...Exchange Rate Risk When we are dealing with currency risks, we need to make sure that we take appropriate steps to mitigate our risks or we might end up losing the bulk of our investment (P. COLLIER, 2012). Currency risk can broadly be divided in to three further categories, namely transaction risk (or transaction exposure), translation risk (or translation exposure) and economic risk (or economic exposure) (BJORN DOHRING, 2008). Below we will discuss each of these three types of risks in detail and determine the nature of the risk faced by the importer in question. Transaction risk occurs over a period of time. For instance, let’s say goods are sold by a vendor in United Kingdom to a...
8 Pages(2000 words)Essay

Forecasting Exchange Rates

...Finance and Accounting: Assignment al Affiliation QUESTION The Thailand money market has been violated and foreign investors are losing confidence. It should not dampen the hopes of Blade Inc to expand their operations in Thailand. The fact that Entertainment product Inc commits itself to import a limited number of Blade’s inc products is attributed to their unfavorable market condition in Thailand. 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. Using fundamental forecast will depend on interest rate which could help the company understand the trends of the interest rate... in the...
2 Pages(500 words)Case Study

Exchange Rates

...the income tax rates, cost of capital, sales growth rate which in return maximized profits. Minimization of transaction costs leverages exchange rates with a target of maximizing profits (Ostrow, 2011). Transaction cost helps in determination of goods and services for leveraging economic exchange rates through the implementation of the minimum prices in the market. Transaction cost consists of the bargaining cost that is regarded as an acceptable agreement for increasing profits. Apart from having economic performance and political stability for seeking out the exchange rate, transaction cost also...
1 Pages(250 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Statistics Project on topic Effect of the exchange rates and inflation on the investment for FREE!

Contact Us