Bilateral Exchange Rate Movements
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This research studies several factors that might affect the bilateral exchange rate between the Japanese yen and the US dollar, including the balance of trade, GDP, GDP per capita, money supply, total reserves, real interest rate and inflation rates. The paper describes the methodology and results of the study and finds that the two most important factors affecting the exchange rate are the money supply and the real interest rate growth differential. However, the authors note that there are several other variables and factors that could not quantified and may have impacted these results.
From the Paper:"There are numerous factors that may directly or indirectly affect bilateral exchange rates between countries. Among the factors studied in our different classes were relative inflation rates, relative interest rates, relative income levels, government controls, and expectations.
"Being able to forecast the exchange rates is a very important tool for all the companies especially the Multi-National ones that conduct most of their transactions in foreign currencies. While conducting a research on the important factors and how they behaved since 1972, we came up with a list of factors that have a potential impact on the bilateral exchange rate of the US$ and the Yen.
"In this paper, we will try to see if those factors actually played the role they are supposed to in determining exchange rates and forecasting it. If we fail to show the relationship between exchange rates and those factors then we can conclude that exchange rates are like most of the other variables that are impossible to forecast and are mostly derived by self-fulfilling prophecies."
Sample of Sources Used:
- Baharumshah, A., & Khim Sen, L., & Kian Ping, L., (2002). Retrieved December 1, 2006, from http://220.127.116.11/eps/if/papers/0307/0307005.pdf
- Balance of trade. Wikipedia.org. Retrieved December 1, 2005, from http://en.wikipedia.org/wiki/Balance_of_trade
- Bley, J (2005). International Finance lecture. American University of Sharjah.
- Cagan, P., & Haraf, W. (1990). Monetary policy for a changing financial environment. Books.google.com. Retrieved December1, 2005, from http://books.google.com/books?ie=UTF
- Chortareas, G., & Driver, R., (2001). PPP and the real exchange rate-real interest rate differential puzzle revisited: evidence from non-stationary panel data; Bank of England. Retrieved December 3, 2006 from http://www.bankofengland.co.uk/publications/workingpapers/wp138.pdf
Cite this Research Paper:
Bilateral Exchange Rate Movements (2013, November 04) Retrieved May 25, 2020, from https://www.academon.com/research-paper/bilateral-exchange-rate-movements-153716/
"Bilateral Exchange Rate Movements" 04 November 2013. Web. 25 May. 2020. <https://www.academon.com/research-paper/bilateral-exchange-rate-movements-153716/>