Exchange Rate and Balance of Payments

If the expected inflation rate in Canada is 4% , what should the expected inflation rate be in the US? __________________________

In the interim the Japanese yen is viewed as a place of refuge coin in circumstances of worldwide unpredictability, so a fortifying yen proposes dealers see a Hillary Clinton as more improbable.

The American dollar rate can reveal the value of dollar compared to other countries. For example,

Japan has been involved in currency manipulation from the early 2000. From 2000 to 2014, Japan 's holdings of foreign exchange reserves increased from $347 billion to $1208 billion, a quadrupled gain of $861 billion. The holdings of foreign assets in Japan 's GPIF also increased to $308.8 billion in 2013, and project to increase to $480 billion in the future (Bergsten 2014). Japan 's trade balance and current account remain suppressed in 2013 due to several factors, such as earthquake and tsunami, which increased demand for imports in anticipation of value-added tax increases that took effect in 2015. This also led to short-run impact of the fall of yen, which increased cost of Japan 's imports. In the upcoming years, the devaluation of yen is expected

Bulletin), look up the exchange rate for U. S. dollars with Japanese yen for each of the

Where the U.S. dollar-euro exchange rate has been in the past several decades from 1999-2014 is as follows. Ever since the euro was created in January of 1999, the value of it has equaled to $1.17. In October of 2000, the dollar was gaining strength when the euro was just $0.88. Afterwards the dollar continued to decline against the euro by 39% from 2001 to 2004 (Islam, 2005). However, in 2005 the dollar rose, but negative outlooks began to occur during the Great Recession in 2006. As the dollar started to decline in 2006 before the subprime mortgage crisis, capital flows caused more volatility in dollar-euro exchange rate market forcing individuals to deal with this economic situation (Harvey,

Wall Street Journal author Chelsey Dulaney, discusses the appreciation of the Japanese YEN (¥) and its impact on its own economy and foreign investors. For the past quarter, the USD was the strongest amongst its competitors until it fell about 0.1% to ¥ 108.1. However, as frequently described within the article, there are no signs of slowing growth for the YEN and Japanese government officials are now proposing a plan that will halt the YEN’s growth. Factors that are contributing to this hike include investors placing “safe haven” assets within the country and general worries about the overall health of the global economy. Despite plans for future intervention, Japan recently implemented monetary policy changes during the first half of the year. Japan hoped that by lowering interest rates in the negatives, it will encourage economic growth, making exports globally competitive. However, despite these changes, Japan 's economy is in dire need of growth stimulation and most foreign strategists believe that Japan will not implement any changes until they are essentially "cutting it close", keeping in mind that Japan is still in a recession. Strategist, Merill Lynch for Bank of America claims that Japan will most likely act when YEN falls down to ¥100, a figure that has not been seen since 2013.

The exchange rate between countries determines one currency’s strength in comparison to another. These rates also oversee the economic growth and the currency purchasing power of countries. Therefore, exchange rates are vital in ensuring that one country can maintain its value versus the US dollar which is the most dominant currency. Currently, the Euro/USD exchange rate is at 1.0666. This paper strives to give clear predictions on the value of the Euro against the USD short term and long term.

The mainly methodology in this project are Augmented Dickey-Fuller (ADF) Unit Root Test, ordinary least square regression (OLS) and Vector autoregression (VAR) model, which utilize in this paper to examine the relationships between the exchange rate and various economic fundamental variables. About econometric software, where it is used is Stata.

The exchange rate is the price of a nation’s currency in terms of another currency. The domestic currency and the foreign currency are the two components of an exchange rate. In a direct quotation, the price of the foreign currency is expressed in terms of the domestic currency and the vise versa is the indirect currency. Most exchange rates use the US dollar as their base currency and other currencies as the counter currency. There a few exceptions, the Euro and commonwealth currencies such as the Australian dollar, the British pound and the New Zealand dollar (Investopedia, LLC., 2014).

Globalization and liberalization have been promoting the integration of the global economy over the past decades. While the most significant change under this process is the increasing number of cross-border trades over the world, and it is obvious that exchange rates, as the quintessential international financial variable, plays a vital important role in the multinational transactions. For the last 25 years, worldwide economists have been studying the relationship between macroeconomic variables and exchange rates. One of the aims of the research is to make predictions based on the models (or links) they have found. However, many of them failed to uncover the link and tend to think that exchange rates movements may follow a random walk, but some of them still found some evidence that support the existence of such a link effective in the short-term and to a greater extent in the long-term. They, therefore, constructed their exchange rate determination models and made a calendar of expected macroeconomic announcements, and it has become a regular part of many financial Medias, such as The Economists and Financial Times. One of the most frequently discussed models is the flexible-price monetary model, and which is also the main discussion topic of this essay.

For example, one United States dollar buys 104.08 units of Japanese yen. The rate directly correspond to the base currency. If the rate increases to 110 units of Japanese yen; therefore, it appreciates. Overall, the increase or decrease of a rate will always corresponds to the appreciation or depreciation of the base currency, and the inverse corresponds to the quoted currency. When one currency goes up in value relative to another, the other currency must go down.

Exchange rate is the price of a nation’s currency in terms of another currency. Basically, it is the price of some foreign currency in terms of a home currency. Economist define the long-run as the period in which prices are flexible, and the short-run as the period in which prices are sticky. Therefore, the forces behind the exchange rate movements should be examined both in the long run and short run. Following a standard text-book description, I start with the long-run period.

DISSERTATION TOPIC: THE RELATIONSHIP BETWEEN EXCHANGE RATE VOLATILITY AND TRADE (US TRADE IN GOODS, TRADE IN SERVICES AND TRADE IN GOODS AND SERVICES (1970-2014)

The research methodology is an indispensable process of the whole project that can help researchers collect useful information or data related to the subject they focus on. To put it another way, it is the way to achieve the goals of the research for researchers. The aim of this chapter is to describe in detail the method taken in the process of the study so that the whole research would be analysed and evaluated clearly. The specific purpose of the entire paper is to verify whether the theorem of PPP is established, which will be achieved through modeling by selecting the nominal exchange rate and the CPI within the selected countries (Japan and India).