5) Money and foreign exchange markets in Sydney and New York are very efficient. The following information is available: Spot Exchange Rate One year interest Rate Expected inflation Sydney 0.67 $/AS 2.83% unknown New York 0.67 $/AS 3.6% 7.5% a. What do financial markets suggest for inflation in Australia next year? b. Estimate today's one-year forward exchange rate between the dollar and the Australian $.
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- If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.What does it mean to say that a currency appreciates? Depreciates? Becomes stronger? Becomes weaker?Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate?e - enor-P Use the expression: rea! - PrOT ,where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pro, is foreign price level (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?
- Assume that the export price of a Sony Smartphone from Naguya, Japan is VIS. The exchange rate is 87.60S. The forecast rate of inflation in the United States is 22% per year and is 1,5% per year in Japan. Use this data to answer the following questions on exchange rate pass through. a. What was the export price for the Sony Smartphone at the begianing of the year expressed in U.S. dollars? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? e. Assuming 100% pass-through of exehange rate, what will the dollar price of a Sony Smartphone be at the end of the year? nini d. Assuming 80% pass-through, what will the dollar price of a Sony Smartphone be at the end of the year?The Foreign Exchange MarketThe Jamaican dollar experienced a rapid depreciation in the exchange rate during 2020 due to thepandemic's impact on key sectors. The exchange rate in 2020 closed at J$142.65 to US$1.00,after opening the year at J$132.57, resulting in a 7.6 per cent depreciation. As at FridaySeptember 16, 2022, the exchange rate was at approximately $ JA 150 to US $1 Arguments for and against fixed exchange rate.The Foreign Exchange MarketThe Jamaican dollar experienced a rapid depreciation in the exchange rate during 2020 due to thepandemic's impact on key sectors. The exchange rate in 2020 closed at J$142.65 to US$1.00,after opening the year at J$132.57, resulting in a 7.6 per cent depreciation. As at FridaySeptember 16, 2022, the exchange rate was at approximately $ JA 150 to US $1.QUESTIONGiven this rapid depreciation of the Jamaican dollar against the US dollar,should the government of Jamaica adopt a Fixed Exchange Rate regime ormaintain the current Floating Rate regime?Outline to answering the question Clear distinction between fixed exchange rate and floating exchange rate, Examples of countries that uses fixed exchange rate regime and those that uses floatingexchange rate regime and Arguments for and against floating exchange rate
- # S E € 37 7 E 47 Problem 6 Corolla Exports and Pass-Through Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥87.60/$. The forecast rate of inflation in the United States is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass through. a. What was the export price for the Corolla at the beginning of the year expressed in U.S. dollars? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? c. Assuming 100% pass-through of exchange rate, what will the dollar price of a Corolla be at the end of the year? d. Assuming 75% pass-through, what will the dollar price of a Corolla be at the end of the year?1. a) Is the following graph about the "Purchasing Power of the Diminishing Dollar" misleading? Why or why not? GELİNAARADICS ANKAPILA 1998-ESENHOWR$1.00 WERNER FALT THE END OF AMERICA ELEMEN 5-% JUVE SANA 1993-MINNE94 THE EMERS Purchasing Power of the Diminishing Dollar 1968-JOHNSON 1973-MXON M 1978-CARTER A b) Provide a time-series graph that accurately reflects the data: [(1978- Carter, $0.44), (1973- Nixon, $0.64), (1968- Johnson, $0.83), (1963- Kennedy, $0.96), (1958-Eisenhower, $1.00).What would be the effect of a devaluation on a country’s imports and exports? If a country imports most ofthe goods included in the basket of goods and servicesused to calculate the CPI, what do you think the effectwill be on this country’s inflation rate?
- In 2020, inflation rate in UK is 4.5% and in Spain it is 4.1%. In 2021, inflation rate in UK is 7.3% and in Spain it is 6.9%. In 2020 1.47EURO / GBP. Assume UK is home country. What is the expected exchange rate in 2022 (2 years later)? Select one: O a. 0.675 O b. 1.465 O c. 1.464 O d. 1.459A South American country has had a high rate of inflation. Recently, its exchange rate was 15 cruzados per dollar; that is, one dollar will buy 15 cruzados. It is likely that the country will continue to experience a 25% inflation rate and that the U.S. will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many cruzados 5 years from now?Assume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is TTR=10% percent while the US inflation rate is tUS*=0%. If %3D export value of Turkey equals ± 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t billion deficit. If the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX would converge to t billion deficit in long run.