4.3 Theories of Exchange Rate Determination 汇率决定理论

教学视频：

课堂练习：

1. Purchasing Power Parity (PPP) 购买力平价理论

The purchasing power parity (PPP) theory uses the long-term equilibrium exchange rate of two currencies to equalize their purchasing power.

购买力平价理论利用两种货币的长期均衡汇率来均衡其购买力。

2. Interest Rate Parity 利率平价理论

The interest rate parity is the basic identity that relates interest rates and exchange rates.

Interest rate parity is a non-arbitrage condition which says that the returns from borrowing in one currency, exchanging that currency for another currency and investing in interest-bearing instruments of the second currency, while simultaneously purchasing futures contracts to convert the currency back at the end of the investment period, should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency. If the returns are different, investors could theoretically arbitrage and make risk-free return.

3.Balance of Payments Model 国际收支理论

This model holds that a foreign exchange rate must be at its equilibrium level—the rate which produces a stable current account balance.

A nation with a trade deficit will experience reduction in its foreign exchange reserves which ultimately lowers (depreciates) the value of its currency. The cheaper currency renders the nation's goods (exports) more affordable in the global market place while making imports more expensive. After an intermediate period, imports are forced down and exports rise, thus stabilizing the trade balance and the currency towards equilibrium.

Like PPP, the balance of payments model focuses largely on tradable goods and services, ignoring the increasing role of global capital flows.

4. Asset Market Model 资产市场理论

The asset market approach views currencies as asset prices traded in an efficient financial market. consequently, currencies are increasingly demonstrating a strong correlation with other markets, particularly equities.

Checkpoints:

Explain how, according to the purchasing power parity theory, exchange rates will adjust if inflation in the United States is 3 percent and inflation in Japan is 1 percent.