Exam 7: Foreign Exchange Rate Determination and Forecasting

________, traditionally referred to as chartists, focus on price and volume data to determine past trends that are expected to continue into the future.

The Russian Ruble crisis of 1998 was a complex combination of speculative pressures best explained by ________ to exchange rate determination.

Technical analysis of exchange rates developed in part due to the forecasting inadequacies of fundamental exchange rate theories.

Prior to July 2, 1997, the Thai government

The authors did not identify which of the following as a root of the Asian currency crisis?

When the Russian Ruble reached the limits of the bands about its managed float targets (Ru5.70/$ to Ru6.35/$) in 1997, the Russian government would intervene in the markets to stabilize the Ruble. If the exchange rate approached Ru5.70/$ the government would ________ Rubles using foreign exchange and gold, or if the exchange rate approached Ru6.35/$ they would ________ Rubles.

The "tequila effect" is a slang term used to describe a form of financial panic called ________.

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are ________ theories rather than ________ theories.

The ________ approach states that the exchange rate is determined by the supply and demand for national currency stocks, as well as the expected future levels and rates of growth of monetary stock

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate. i.e., they are linked AND mutually determined.

The authors refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as ________.

A major U.S. multinational firm has forecast the euro/dollar rate to be euro1.10/$ one year hence, and an exchange rate of $1.40 for the British pound (£) in the same time period. What does this imply the company's expected rate for the euro per pound to be in one year?

Which of the following is a driver in the determination of foreign exchange rates under the Asset Market Approach to forecasting?

After the Russian government (in August 1998) allowed the Ruble to move outside its official trading range of between Ru5.70/$-Ru6.35/$, the value of the Ruble eventually ________ to around ________ by May 1999.

One of the solutions to the Argentine peso crisis of 2003 was to devalue the peso to the approximate value of $2.00 per Argentine peso.

The ________ approach argues that equilibrium exchange rates are achieved when the net inflow of foreign exchange arising from current account activities is equal to the net outflow of foreign exchange arising from financial account activities.

Short-term foreign exchange forecasts are often motivated by such activities as ________ whereas long-term forecasts are more likely motivated by ________.

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

Under a fixed exchange rate regime, the government of the country is officially responsible for: