Audience

Business students and employees seeking a broad understanding of the development and operation of American financial institutions

Prerequisites

An understanding of basic economics

Course Aim

To explain short-run and long-run exchange rates and to discuss changes in exchange rates

Learning Objectives

Explain how exchange rates affect domestic consumers and exporters and describe how the foreign exchange market operates. Identify the factors that affect exchange rates in the long run. Identify the long-run causes and the effects of currency depreciation. Discuss short-run exchange rate determination models. Calculate the relative expected returns on domestic investments and foreign investments and the current exchange rate where the UIP market equilibrium occurs. Describe how changes in the domestic interest rate and foreign interest rates affect the current exchange rate. Describe how the current exchange rate is affected by changes in the expected future exchange rate and by changes in money supply. Predict the effects of short-run exchange rate determinants.

Topics Covered

The Foreign Exchange Market - Foreign exchange rates - Exchange rates in the long run - Hands-on: Identifying foreign exchange rates Exchange Rates in the Short Run - Exchange rate determination models - Expected returns and market equilibrium Changes in Exchange Rates - Expected returns and interest rates - Expected exchange rates and money growth - Hands-on: Predicting changes in exchange rates

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