Interest Rates and Exchange Rates Case Study

Interest Rates and Exchange Rates
A case study analysis of interest rates and exchange rates, particularly looking at the US current deficit and the weakness in the market of Sterling.
# 118533 | 2,775 words | 19 sources | APA | 2007 | GB


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Description:

This paper provides a general introduction to and an overview of interest rates and exchange rates in different situations. The paper presents a case study that discusses reasons for the US current deficit and the weakness in the market of Sterling. The paper also discusses the power of comments by the president of the Minneapolis Federal Reserve and of Central Bank officials on the markets.

Methodology
Introduction To Exchange Rates
Fixed Exchange Rates
Dual Exchange Rates
Foreign Exchange Market
Introduction To Interest Rates
Interest Rate Risks
Interest Rate Swaps
Interest Rate Ceiling
Case Study
What Are The Reasons For The US Current Account Deficit?
What Are The Reasons For The Weakness In The Market Of Sterling?
Consider The Reported Comment Of The President Of The Minneapolis Federal Reserve And Discuss The Importance Of Comments By Central Bank Officials, Are Markets Over Sensitive In Discovering "Hints In Comments By Officials?
How Powerful In Relation To The US Interest Rate Decision Is
The President Of The Minneapolis Federal Reserve?
In Relation To The Euro, What Is Meant By The Single
Currency's Ability To Disperse Country Specific Political Risk?
How Does The Euro Differ From The Sterling In This Regard?
Conclusion

From the Paper:

"Speculators can be divided into short-term (one week or less) and those with a long-run horizon (P. Howells Ch.18,2005). Short-termers are like to hold extrapolative expectations whilst long termers hold regressive expectations. Thus markets will be oversensitive depending on which of the groups dominates the market at one particular time. The importance of comments made by the central bank is also likely to be dependent upon who actually says it, and the power they have to make there comments take affect. Thus the comment of a juniour analyst are not taken with the same amount of importance as say the president of the Federal Reserve. Generally, when comments are made by central bank officials this is because they have the power to influence economic variables thus trying to establish market effeciency and smoothness when changes are likely to be made to economic variables."

Sample of Sources Used:

  • Madura, J (2006), Financial Institutions And Markets, 7th Edition, Thompson South Western
  • Mishkin, F. (2006) Financial Markets and Institutions, 5th edition. Addison Wesley.
  • Johnson, S. (2004) Dollar rally reverses on "alarming" deficit. Financial Times, 14th June 2004. CASE STUDY
  • F. Mishkin and S. Eakins (2006). Financial Markets and Institutions. 5th edition. Pearson, Addison Wesley.
  • Sloman, J. (2007). Essentials of Economics. 4th edition. Prentice Hall.

Cite this Case Study:

APA Format

Interest Rates and Exchange Rates (2010, February 05) Retrieved December 03, 2021, from https://www.academon.com/case-study/interest-rates-and-exchange-rates-118533/

MLA Format

"Interest Rates and Exchange Rates" 05 February 2010. Web. 03 December. 2021. <https://www.academon.com/case-study/interest-rates-and-exchange-rates-118533/>

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