ch02 - Chapter 2 Foreign Exchange Parity Relations...

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Chapter 2 Foreign Exchange Parity Relations
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2 - 2 Introduction In this chapter we look at: Foreign exchange fundamentals; in particular the balance of payments and exchange rate regimes. Describe the factors that cause a nation’s currency to appreciate or depreciate. International parity relations. Discuss the implications of the parity relationships combined.
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2 - 3 Supply and Demand for Foreign Exchange In general, there are many types of transactions that affect the demand and supply of one national currency. From an accounting viewpoint, each country keeps track of the payments on all international transactions in its balance of payments.
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2 - 4 Exhibit 2.1: Foreign Exchange Market Equilibrium
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