Exam 9: Foreign Exchange Rate Determination and Intervention

If the goal were to increase the value of a country's currency - to fight an depreciation of the domestic currency in exchange for foreign currency - the central bank would:

The ________ provides a means to account for international cash flows in a standardized and systematic manner.

Slow economic growth and continued unemployment problems are common reasons for central banks to hold currency values down.

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

Direct intervention for currency valuation involves limiting the ability to exchange domestic currency for foreign currency.

________ is the restriction of access to foreign currency by government.

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:

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

A country wishing for its currency to fall in value, particularly when confronted with a continual appreciation of its value against major trading partner currencies, the central bank may work to lower real interest rates, reducing the returns to capital.

The asset market approach to forecasting is not applicable to emerging markets.

Leading up to the Russian currency collapse of 1998, Russia followed a currency policy of managed float that allowed their currency to slide daily at a 1.5% per month rate.

Foreign exchange forecasting can be either long-term, or short-term in duration. Compare and contrast the motivation for and the techniques a forecaster might use for each of the time periods.

The Asian Currency crisis appeared to begin in:

The large and liquid capital and currency markets follow many of the principles outlined by the different schools of thought on exchange rate determination (parity conditions, balance of payments approach, and asset approach) relatively well in the medium to long term.

Which of the following versions of PPP is thought to be the most relevant to possibly explaining what drives exchange rate values?

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

The asset market approach to forecasting assumes that whether foreigners are willing to hold claims in monetary form depends on an extensive set of investment considerations. These include all but which of the following choices?

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.

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

A currency board is: