Monetary approach to the Exchange Rate, Financial Management

a The Monetary Approach to the ER. All else equal, an increase in the interest rate in Canada is associated, in the long run, with higher prices in Canada and an appreciated exchange rate (i.e. lower e2).

b From PPP theory we can conclude that a country with high inflation (relative to its foreign partners) should have an appreciating currency.

c All else equal, a rise in dollar interest rates causes the dollar to appreciate against the euro while a rise in euro interest rates causes the dollar to depreciate against the euro. Today's exchange rate is also altered by changes in its expected future level. If there is a decrease in the expected future level of the dollar/euro rate, for example, then at unchanged interest rates, today's dollar/euro exchange rate will appreciate.

Posted Date: 2/15/2013 12:06:49 AM | Location : United States







Related Discussions:- Monetary approach to the Exchange Rate, Assignment Help, Ask Question on Monetary approach to the Exchange Rate, Get Answer, Expert's Help, Monetary approach to the Exchange Rate Discussions

Write discussion on Monetary approach to the Exchange Rate
Your posts are moderated
Related Questions
Accounting Framework - Convention of Conservation Conservatism refers to the principle and practices that are established through way of tradition, reluctance to change from e

Q. Determine marginal tax rate? Ans. Henkel does not carry debt beyond five years. To determine the cost of debt: a. For Henkel AG, which Treasury rate at which maturit

The attached file (MFR & FFM Ass Returns Data.xls) gives 132 months returns for thirty securities drawn from the FT ALL share index as well as the returns on the FT ALL share index

Can a corporation have too much working capital?  Explain. A firm can have very much working capital if it is losing the opportunity to invest in high returning fixed assets and

Mr. James K. Silber, an avid international investor, just sold a share of a French company, for FF50. The share was bought for FF42 a year ago. The exchange rate is FF5.80 each U.S

In bootstrapping method, on-the-run treasury issues are used as they are fairly priced, and there is no credit risk or liquidity risk involved. In practice observed yie

where you deposit 1000dollars at the end of each year for 4 years, what will be the amount of deposits at the end of each year if it is compounded at 12% semi-annually?

What is the most conservative type of working capital financing plan a company could implement?  Explain. An all equity capital structure would be mainly conservative type of wor

Evaluation of money-market hedge Expected receipt after 3 months = $300000 Dollar interest rate over three months = 5.4/ 4 = 1.35% Dollars to borrow now to have $300000 l

Question 1 You have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck. The truck's basic price is Rs.50,000 and i