What is meant by the term “fundamental equilibrium path” for a currency value? What is “noise”?
Answer to relevant QuestionsExplain how the asset market approach can be used to forecast future spot exchange rates. How does the asset market approach differ from the BOP approach to forecasting? Explain why infrastructure strengths have helped to offset the large BOP deficits on current account in the United States. Name the four main types of transactions from which transaction exposure arises. What is a functional currency? What is a non-functional currency? a. Why do unexpected exchange rate changes contribute to operating exposure, but expected exchange rate changes do not? b. Explain the time horizons used to analyze unexpected changes in exchange rates.
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