Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
12 Cards in this Set
- Front
- Back
|
asset-market approach
|
a method of determining short run exchange rates where investors consider two key factors when deciding between domestic and foreign investments; relative levels of interest rates and expected changes in the exchange rate itself over the term of the investment
|
|
|
forecasting exchange rates
|
attempts to predict future rates of exchange
|
|
|
fundamental analysis
|
the opposite of technical analysis; involves consideration of economic variables that are likely to affect a currency's value
|
|
|
judgemental forecasts
|
subjective or common sense exchange rate forecasts based on economic, political, and other data for a country
|
|
|
law of one price
|
part of the purchasing power parity approach to determining exchange rates; asserts that identical goods should cost the same in all nations, assuming that it is costless to ship goods between nations and there are no barriers to trade
|
|
|
market expectations
|
examples include news about future market fundamentals and traders' opinions about future exchange rates
|
|
|
market fundamentals
|
economic variables such as productivity, inflation rates, real interest rates, consumer preferences, and government trade policy
|
|
|
nominal (money) interest rate
|
the rate of return on assets that can be earned in a particular country, not adjusted for the rate of inflation
|
|
|
overshooting
|
when an exchange rate's short run response to a change in market fundamentals is greater than its long run response
|
|
|
purchasing power parity theory
|
a method of determining the equilibrium exchange rate by means of the price levels and their variations in different nations
|
|
|
real interest rate
|
the nominal interest rate minus the inflation rate
|
|
|
technical analysis
|
a method of exchange rate forecasting that involves the use of historical exchange rate data to estimate future values
|
