Banking and Monetary Policy_Butkiewicz_Date__021110

Banking and Monetary Policy_Butkiewicz_Date__021110 - 11:...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6: Foreign Exchange Markets 3: no country can enjoy high standard of living and be completely self sufficient - Purchase foreign stocks and bonds when other countries are doing well 4: interbank market changes from time to time (goes around world- follows clock) - Dealer spreads will be very narrow: save more money with ATM, Credit Card, Dealer 5: .67Euros/$1, same as $1.5/1 Euro - E= amount foreign currency needed to buy one U.S. dollar 6: 2002= peak year for the U.S. $ in recent years (about $0.9/1 Euro) 7: from 02-09 the dollar depreciated, 09-Now it is appreciating 8: When U.S. dollar depreciates: - Cheaper to buy from other countries - Value of assets fall because foreign currency now buys fewer U.S. dollars 9: consumers are better off 10: weak dollar—countries will buy more (increase exports) - Timothy Geithner (government treasury secretary)
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 11: exchange rates risk= risk value of currency will change people can hedge somewhat by holding (selling) futures contracts 14: eP- price of American goods in EuropeKNOW the formula on this slide 15: example form slide-- .81150/100=E=12 16: real exchange rate and nominal exchange rate are directly related 17: looks at trade with out most important trading partners 22: PPPlong run behavior of exchange rates-Price of traded goods should be the same everywhere o Example: $1 U.S. should cost Euro 24: not always best because lost money 25: P*%= rate of inflation in Europe 26: countries with higher inflation rates values of currency will depreciate (all other things being equal) discussion presumes floating exchange rates...
View Full Document

Ask a homework question - tutors are online