The Japanese Yen and the American Dollar

Paper Summary:

This paper discusses the exchange rate movement of the Japanese Yen to the American dollar using three popular exchange rate models: the Purchasing Power Parity (PPP); the Current Account Model (CAM) and the Portfolio Balance Model (PBM). These three models are discussed after a brief introduction that establishes the groundwork for the investigation. The paper includes tables.

From the Paper:

"Hedging and arbitrage to achieve exchange rate maximization are primarily functions of capitalistic economies. Since both the United States and Japan are "capitalist" countries (although each adheres to a different philosophy of capitalism) a study of the relationship between the Japanese Yen and the American Dollar can be an instructive guide to the disparate nature of capitalism. The American government still adheres to the myth of free market fluctuations and flexibility as the basis of capitalism, while the Japanese believe that business and government must become allies to engender growth of Japanese companies."

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