Exchange rates

Exchange rates

• Exchange Rates: The value of one currency expressed in terms of another.

What are the influences on exchange rate:

• Interest rates
• Inflation
• Economic growth
• Public debt
• Speculation
• Shocks
• Balance of payments

How can the government effect interest rates?

• Keep debt down
• Alter interest rates, the higher the interest rates, the stronger the currency
• Encourage exports

Real Exchange rate:

• The exchange rate against another currency adjusted for…