IGCSE经济——Exchange rate

Exchange rate影响汇率的因素

Factors which influence the exchange rate

An exchange rate is determined by supply and demand factors. These are the various factors which determine the demand and supply of a currency.

（对于某种货币供给和需求的变化会导致汇率的变化）

1. Inflation

If inflation in the UK is lower than elsewhere, then UK exports will become more competitive and there will be an increase in demand for £s. Also foreign goods will be less competitive and so UK citizens will supply less £s to buy foreign goods.Therefore the rate of £ will tend to increase.

（Jason 老师分析和讲解：通货膨胀程度低的话意味着英国物价相对便宜，所以会促进出口的增加和对于英镑的需求增加。另一方面，英国人会比较偏好购买本国商品，英镑供给会减少，需求增加，英镑需求曲线向右移动，供给曲线向左移动，抬高英镑汇率，英镑价格升高。

2. Interest Rates

If UK interest rates rise relative to elsewhere, it will become more attractive to deposit money in the UK, Therefore demand for Sterling will rise. This is known as “hot money flows” and is an important short run determinant of the value of a currency

（Jason老师分析和讲解：英国利率提高，意味着更能吸引国外公司来英国储蓄和投资，对于英镑的需求就会升高，也可以称为热钱的流入，汇率短期内的变化可能会由于货币政策（汇率的变化）而升值或者贬值）

3. Speculation

If speculators believe the sterling will rise in the future, they will demand more now to be able to make a profit. This increase in demand will cause the value to rise.Therefore movements in the exchange rate do not always reflect economic fundamentals, but are often driven by the sentiments of the financial markets. For example, if markets see news which makes an interest rate increase more likely, the value of the Pound will probably rise in anticipation.

（Jason老师分析：投机行为指的是在市场中你认为或者预计英镑会上涨，所以想在目前低价的时候买入，高价时抛售，这点其实和股票投资还是比较相似的，那这样的话英镑的需求就会上升。当然汇率的变动不一定在所有的情况下都能反应经济变化情况，可能很多时候是由于金融市场投机者的介入而导致的（如亚洲金融危机，当时泰国遭受的经济重创就是由于国际市场大量抛售泰铢所致），基本面的宏观信息（如预期利率的上升也会导致大量国际投资者换汇成英镑对英国进行投资，导致英镑的需求上升，英镑升值）

4. Change in competitiveness

If British goods become more attractive and competitive this will also cause the value of the Exchange Rate to rise. This is important for determining the long run value of the Pound.

（Jason老师分析：英国商品如果在国际市场上比较受欢迎，也会导致英镑升值，当然从长期来看，英国商品在国际市场上受欢迎，才能长期保证英镑在汇市的需求增加，汇率保持持续增长。）

5. Relative strength of other currencies

Between 1999 and 2001 the £ appreciated because the Euro was seen as a weak currency.

（在1999年至2001年期间，有兴趣的同学可以去了解下，在这2年期间，英镑兑欧元一致保持强劲势头）

6. Balance of Payments

A large deficit on the current account means that the value of imports is greater than the value of exports. If this is financed by a suplus on the financial / capital account then this is OK. But a country who struggles to attract enough capital inflows will see a depreciation in the currency.

（Jason老师分析：国际收支平衡表盈余，指的是出口大于进口，因为你出口商品以后，会得到大量外汇储备，而赤字，当然是出口小于进口。如果一个国家很难吸引其他国来投资，说明对于货币的需求不足，本国货币可能会贬值。）

固定汇率制和浮动汇率制

The advantages of a fixed exchange rate system

Stability

Some economists would argue that this is the most significant advantage. If exchange rates are stable over a given period of time, exporting firms will be able to plan ahead without worrying about huge swings in the value of the pound eliminating their profit margin. This will encourage more investment and trade between countries, both of which are important if economies are to grow in the long term.

Discipline

If a country is part of an exchange rate system, they cannot devalue their currency at the first sign of trouble (i.e. a large current account deficit). They have to try and cure the fundamental problem by, for example, improving the competitiveness of their exporters through increased productivity and improved quality.One can also argue that fixed exchange rate systems discipline countries into keeping inflation down. Again, there is no option to devalue if increasing inflation leads to reduced competitiveness.

Avoid speculation?Theoretically, fixed exchange rates should eliminate speculation because there is no point buying and selling currencies that will not change in value. In the real world, this is not always the case.Speculators believed the politicians when they said that these rates were forever, and so did not see the point in buying or selling the currencies involved.

The disadvantages of a fixed exchange rate system

The loss of monetary policy

A commitment to a fixed exchange rate means that you lose control over all other instruments of monetary policy. Although the government pretended that UK interest rate decisions we still their own (and technically they were) any movement of the German interest rate was usually quickly followed by a similar change in the UK. Today the Monetary Policy Committee (MPC) can set interest rates at whatever level they want, but they cannot control the value of the pound at the same time. Controlling one of these two instruments means a loss of control of the other.The need for a large pool of reservesTo maintain the pound's value within the ERM, the government had to have a large pool of foreign reserves with which to buy the pound when it fell to the floor of the bottom band. Apart from being expensive in itself, some countries may find it hard to get their hands on sufficient stocks of reserves to support their currency. One of the main jobs of the IMF in the Bretton Woods system was to help poor countries in times of trouble and lend them reserves when they were short.

Problems of uncompetitivenessWith a freely floating currency, a deteriorating trade situation should automatically cause the pound to fall (speculators permitting!), which, in turn, would improve the competitiveness of British exporters and improve the trade balance.Economies stuck in a fixed exchange rate system with a deteriorating trade balance may feel that they joined the system at too high an exchange rate. Although they may be allowed to devalue eventually, the exchange rate may be at the wrong rate for significant periods of time. This can cause permanent job losses and recession. Some economists feel that the recession of 1990-92 in the UK was prolonged due to membership of the ERM.

Advantages of a floating exchange rate system

Theoretical elimination of trade imbalances

As we have stated before, floating exchange rates should adjust automatically to trade imbalances, which, in turn, will eliminate the trade imbalance. Of course, it has also been noted that this does not always work in the real world because so few currency transactions that take place are for trade.

No need for reserves?

On the whole, foreign reserves are used to help maintain a currency's position within a fixed exchange rate. If a currency is freely floating, then there is no need to use reserves to affect its value. In the real world, governments will always have some reserves, in case of a crisis in the balance of payments, or if they feel that their currency is getting a bit too high or too low.

More freedom over domestic policy

As was stated above, if the government is not controlling their exchange rate, then they can control their rate of interest. The evidence of the past five years suggests that, although exporters suffer with a strong pound, the economy as a whole is best served when the authorities can control domestic monetary policy.

The disadvantages of a floating exchange rate system

Speculation

Again, there are two ways of looking at this. You could argue that with floating exchange rates, speculation is less likely because an exchange rate can move freely up or down, so it is more likely to be at its true level. But the very fact that it does move up and down easily means it can move a long way if speculators think that it is at the wrong level. The quick rise in the value of the pound in the second half of 1996 showed that big swings in currencies do not just happen when speculators force them out of fixed exchange rate systems.

Uncertainty

The biggest advantage of fixed exchange rate systems was their stability and certainty. This tended to increase investment and trade, both good things. The biggest disadvantage of floating exchange rate systems is their uncertainty, reducing the rate at which investment and trade increase. Firms often use the currency markets to hedge against large fluctuations in the exchange rate, which helps to a certain extent, but there is still felt to be too much uncertainty.