WS1112, 1.PT - Fakultät III

Univ.-Prof. Dr. J. Franke-Viebach
1
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Universität
Siegen
Fakultät III
Univ.-Prof. Dr. Jan Franke-Viebach
Klausur „Monetäre Außenwirtschaftstheorie und –politik / International Macro“
Wintersemester 2011-12
(1. Prüfungstermin)
Bearbeitungszeit:
60 Minuten
Zur Beachtung:
1.
Die Klausur umfasst 10 Seiten (einschl. dieses Deckblatts). Bitte prüfen Sie die
Vollständigkeit der Klausur.
2.
Benutzen Sie für Ihre Ausführungen die vorgesehenen Lösungsfelder. Reichen
diese nicht aus, benutzen Sie die Rückseiten der Blätter. Mit Bleistift
angefertigte Lösungen werden nicht bewertet.
3.
Hilfsmittel: nichtprogrammierbarer Taschenrechner
4.
ACHTUNG: Die Variablen-Namen haben die gleiche Bedeutung wie in der
Vorlesung. Sofern Sie ebenfalls für die Variablen die Symbole aus der
Vorlesung verwenden, brauchen Sie sie nicht zu definieren.
Question
1
2
3
4
5
Sum
Points achievable
14
8.5
11
10.5
16
60
Points achieved
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Mark
Univ.-Prof. Dr. J. Franke-Viebach
2
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Problem 1: Forex market
The following diagram depicts the market for foreign exchange. The foreign currency
that is traded on the market is the United States dollar.
⎡ € ⎤
e ⎢ ⎥
⎣ $ ⎦
D [$]
a) In the diagram, designate the foreign currency demand schedule with Dd and the
foreign currency supply curve with Ds.
[2 points]
b) Assume we have a system of flexible exchange rates.
b1 Designate the point of equilibrium in the two-dimensional space as point A.
[1 point]
b2 On the axes of the diagram, depict the equilibrating exchange rate as e* and
the amount of traded foreign currency as D*.
[2 points]
C:/ Mon AW Theorie und –politik / Intern Macro / Klausuren \ WS 11 -12 1T
Univ.-Prof. Dr. J. Franke-Viebach
3
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
c) Let us now assume a system with a fixed exchange rate.
c1 Please name the two constituting elements of this sort of system very briefly.
[2 points]
c2 Suppose that at the given fixed exchange rate a surplus demand for foreign
currency exists. Depict this situation in the diagram above by drawing in a
corresponding exchange rate e1. Mark the point in the two-dimensional space
that represents the amount of traded foreign currency at the given exchange
rate. Also mark the amount of traded foreign currency on the horizontal axis as
D1 .
[4 points]
d) Name the two sources of demand for foreign exchange.
[2 points]
e) Name one of the functions of the foreign exchange market.
[1 point]
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Univ.-Prof. Dr. J. Franke-Viebach
4
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Problem 2: Forward market
A German company is exporting some equipment to Switzerland and will receive 10
million Swiss francs three months from now. The current spot exchange rate is
1.5543 [SFr/€]. The treasurer of the company expects the franc to depreciate in the
next weeks, and is concerned about it. The three-month forward rate is 1.5320
[SFr/€].
a) Given the treasurer’s expectations, what action can he take using the forward
contract?
[3.5 points]
b) Three months later, the spot exchange rate turns out to be 1.5101 [SFr/€]. Did
the company benefit because of the treasurer’s action? Please do the necessary
calculations to prove your answer.
[5 points]
C:/ Mon AW Theorie und –politik / Intern Macro / Klausuren \ WS 11 -12 1T
Univ.-Prof. Dr. J. Franke-Viebach
5
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Problem 3: Purchasing Power Parity (PPP) Theory
a) Which variable does the PPP theory try to explain?
[1 point]
b) Sketch the main idea underlying the explanation by completing the following
sentence: “We will have to pay more euros for one dollar, the … “
[4.5 points]
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Univ.-Prof. Dr. J. Franke-Viebach
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
c) PPP as well as PPP theory make a statement about the variables P, P f and e.
Please very briefly say what the difference is between PPP and PPP theory.
[2 points]
d) What is the difference between the traditional version and the modern version of
the PPP theory?
[3.5 points]
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6
Univ.-Prof. Dr. J. Franke-Viebach
7
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Problem 4:
In the sequel, i and i f denote the domestic and the foreign interest rate, respectively.
e is the spot exchange rate (direct rate: one unit of the foreign currency costs e units
of the domestic currency); ee is the expected spot rate one year ahead.
a) What is the following equation called?
i
=
f
i +
[1 point]
e e− e
e
b) Please express the economic content of the equation in words.
[3.5 points]
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Univ.-Prof. Dr. J. Franke-Viebach
8
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
c) Which assumptions about the long run are needed for the equation in a) to simplify
to the following equation?
[4 points]
i
=
if
d) Which particularity holds for a small country (for the equation in a) as well as for
the equation in c))?
[2 points]
.
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Univ.-Prof. Dr. J. Franke-Viebach
9
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
Problem 5: Portfolio Balance Approach to the Exchange Rate
We are given the equilibrium conditions for the money market and for the market for
foreign assets:
M
= m (i, i f) · ( M + B + e · F ) ,
e · F = f (i, i f) · ( M + B + e · F ).
a) Please visualize the equilibrium curves of the two markets in the following graph
(denote them by M and by F, respectively):
[3 points]
e
i
b) The Portfolio Balance Approach tries to give an explanation of short-run
movements of the exchange rate. Why does it only take financial markets into
account?
[4 points]
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Univ.-Prof. Dr. J. Franke-Viebach
10
WS 2011-12: „Monetäre Außenwirtschaftstheorie und –politik / Intern. Macro“ (1.Termin)
c) Say we observe an increase in the foreign interest rate (i f).
c1 Does the equilibrium curve of the market for foreign assets shift to the right or
to the left? Please explain.
[5 points]
c2 Suppose we want to calculate the horizontal shift of the equilibrium curve of
the market for foreign assets. This requires taking the total differential of the
corresponding equation.
Please take the total differential of the equation. (You do not need to make
more calculations.)
[4 points]
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