Introduction
Foreign Exchange Market
a market for converting the currency of one country into that of another country
Exchange Rate
the rate at which one
currency is converted
into another
The Functions of the Foreign Exchange Market
Currency Conversion
To convert the currency of one country
into that of another country
Insuring against Foreign
Ⅱ. Exchange rate regime
1. What is the exchange rate?
In finance, the exchange rates between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency. For example an exchange rate of 91 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that 91 yen is worth the
Determination of Won/USD Exchange Rate With Respect to Global Oil Price Change
To see the relationship between exchange rate and oil price, we use econometrical methodology, multiple regression. Our regression model is this:
s_t=β_1+β_2 (m_t-m_t^* )+β_3 (y_t-y_t^* )+β_4 〖lroil〗_t+u_t
*Explanation about explanatory variable
s_t : Nominal exchange rate (USD/Won)
m_t-m_t^*
2. Policy Analysis with Partial Capital Mobility
• Expansionary fiscal policy, fixed exchange rates
IS curve shifts right, Y and R increase.
Higher R increases foreign capital inflow.
• Creates BP surplus and upward pressure on currency.
Central bank intervenes in the foreign exchange market.
• Buys excess foreign currency.
Incr
I. Introduction of currency wars
War using the exchange rate policy has been sustainable like Europe’s exchange rate policy in the early 20th century and Japan’s exchange rate policy after World War II. Recently, Economic purposes such as restoring slowdown of economy due to financial crisis and recovery of trade deficit are combined with political purpose and retaliatory currency manipul