Questions: 1-Determination of exchange rates: price (law of one price, PPP), inflation, interest rate (short-run vs. long-run),
Question:
Questions:
1-Determination of exchange rates: price (law of one price, PPP), inflation, interest rate (short-run vs. long-run), market psychology, other determinants such as political stability, public debt, economic performance?
2-Describe tools to protect against foreign exchange risks: hedging (spot rates, forward, currency swaps, options, carry trade, arbitrage), natural hedge?
3-Can we forecast foreign exchange rates: efficient vs. inefficient market school, fundamental/technical/judgmental forecasts?
4-How does foreign exchange affect the current account: appreciation vs. depreciation of a currency, exchange rate pass-through, strategies to address exchange rate fluctuations, time lags, j-curve effect?
5-Does currency depreciation reduce a trade deficit: elasticity approach.The different types of currency risks: transaction, translation, and economic?