Tuesday, May 22, 2007

Exchange Rates


Ceteris Paribus
The determinants for exchange rates are;
- If the demand for a nation's currency increases, that currency will appreciate.
- If the supply of a nation's currency decreases, taht currency will appreciate.
- If a nation's currency appreciates, some foreign currency will depreciate relative to it.

This means that in the years of 2002-2005, the Euro has appreciated relative to the RMB, or, the RMB has depreciated relative to the Euro.

1 comment:

Jason Welker said...

Determinants of exchange rates:

1) relative price levels
2) relative incomes
3) consumer tastes and preferences
4) relative interest rates