Exam 9: Foreign Exchange Rate Determination and Forecasting

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

The longer the time horizon of the technical analyst the more accurate the prediction of foreign exchange rates is likely to be.

Which of the following is NOT a technique used by governments or central banks to impact domestic currency valuation?

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 more efficient the foreign exchange market is, the more likely it is that exchange rate movements are random walks.

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

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

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

The principle focus of the IMF bailout efforts during the Asian financial crisis was:

Argentina's economic performance in the 1990s while their peso was pegged to the U.S. dollar can be characterized as ________ rates of inflation and ________ rates of unemployment.

In 1991 the Argentine peso was fixed to the value of the U.S. dollar on a one-to-one basis.

Which of the following is NOT a motivation for a government or central bank to manipulate domestic currency valuation?

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.

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

________ is the active buying and selling of the domestic currency against foreign currencies.

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

The ________ approach argues that exchange rates are determined by the supply and demand for a wide variety of financial assets

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

The balance of payments approach of exchange rate theory is largely dismissed by the academic community today, while the practitioner public still rely on different variations of the theory for their decision making.

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