Briefly describe the exchange rate determination theory and what it contains

1. Exchange rate determination theory is international finance.

One of the core contents of the theory is to analyze what factors determine and affect the exchange rate. The theory of exchange rate determination varies with the economic situation and Western economics.

The development of theories provides a theoretical basis for a country's monetary bureau to formulate exchange rate policies. The theory of exchange rate determination mainly includes the theory of international lending and purchasing power parity.

Doctrine of interest rate parity, doctrine of balance of payments.

Say, the asset market says. The asset market theory is further divided into monetary analysis and portfolio analysis. Monetary analysis is further divided into elastic currency analysis and sticky currency analysis.

2. The exchange rate is determined by the supply and demand in the foreign exchange market. The supply and demand of foreign exchange in turn originates from international borrowing. There are two types of international borrowing: fixed borrowing and liquid lending.

The former refers to loans that have been formed but have not yet entered the actual payment stage; The latter refers to loans that have entered the payment stage. Only changes in liquid lending will affect the supply and demand of foreign exchange.

3. Factors influencing the change of the exchange rateThe actual amount of value represented by the two currencies is the basis for the determination of the exchange rate, and under the influence of the following main factors, the exchange rate is constantly changing.

1) Balance of payments: Among them, the balance of foreign trade plays a decisive role in exchange rate changes. Foreign trade surplus.

The exchange rate of the local currency rises; On the contrary, it is **. The balance of foreign trade directly affects the supply and demand of foreign exchange.

2) Inflation.

It is not only directly related to the value and purchasing power of the actual representation of the currency itself, but also related to the external competitiveness of commodities and the psychological impact on the foreign exchange market. Inflation slows down, and the local currency exchange rate increases**; The opposite is true**.

3) The impact of interest rate level on capital flow: under certain conditions, high interest rate level can attract international short-term capital inflow and increase the local currency exchange rate; Low interest rates are the opposite. The strengthening of the dollar in the first half of the 80s was a result of the high interest rate policy in the United States.

4) The exchange rate policy of each country: Although the exchange rate policy cannot change the basic trend of the exchange rate, the role of a country in further taking measures to aggravate the exchange rate of its own currency according to the trend of its own currency cannot be underestimated.

5) Speculative activities: especially foreign exchange speculation activities of multinational corporations. Sometimes it can cause the exchange rate to fluctuate more than expected by a reasonable range.

6) Political events: major international political events also have a significant impact on the changes in the exchange rate.

The American monetarist school proposes that it is characterized by emphasizing the role of the currency market in the determination of the exchange rate, and believes that the exchange rate is the relative ** of the currencies of the two countries, rather than the relative ** of the products of the two countries. The exchange rate is determined by the money stock in the money market, and the exchange rate reaches equilibrium when the supply and demand of the money stock reach equilibrium. The theory is that the exchange rate should be floating rather than fixed, because a fixed exchange rate would make it impossible to control monetary aggregates, which would automatically affect the balance of payments and thus the exchange rate.

After the 70s of the 20th century, the analysis method of monetarism theory was gradually formed, and the theory of exchange rate determining asset market was gradually formed, mainly including the international monetarist exchange rate model (flexible model), exchange rate overshoot model (viscous model) and financial asset portfolio theory.

Under the gold standard: the ratio of the gold content between the two currencies, that is, the seigniorage parity, becomes the basis for determining the exchange rate of the two currencies.

Under the paper money standard: the amount of value represented by the paper money is the basis for determining the exchange rate under the paper money standard. The amount of value represented by a banknote is determined by each country** from the date of its creation.

The main factors influencing exchange rate movements:

1.Balance of payments.

When a country's balance of payments is greater than its expenditure, it is manifested in the foreign exchange market that the supply and demand of foreign exchange are greater than the demand, so the exchange rate of the national currency rises and the exchange rate of the foreign currency falls.

2.Relative inflation rate.

Inflation in a country means a decrease in the amount of value represented by the country's currency, so the difference in inflation rates between domestic and foreign countries is the dominant factor in determining the long-term trend of the exchange rate. Generally speaking, countries with consistently high relative inflation tend to depreciate their currencies in the foreign exchange market.

3.Relative interest rate level: The relative interest rate level leads to changes in the supply and demand of borrowed capital, which mainly affects the short-term exchange rate and has a very limited impact on the long-term.

4.Market Expectation: As long as the market expects a country's currency to be in the near future**, there is an immediate possibility of selling that country's currency, causing the market for that country's currency to decline immediately**.

5.Market intervention: For example, when a country's currency exchange rate is at a high level, affecting the country's balance of payments and economic development, the country's **bank.

It will sell its own currency to the foreign exchange market and buy foreign exchange, so that the exchange rate of the local currency will be the best in order to achieve the purpose of expanding exports and promoting domestic economic development.

6.Economic growth rate: Generally speaking, a high economic growth rate is not conducive to the national currency in the foreign exchange market in the short term, but in the long run, it is a strong supporter of the strong momentum of the local currency.

7.Political changes: In the event of war, the currency of a politically unstable country will depreciate.

That's about it!

The current exchange rate method is also known as the ending exchange rate method or the single exchange rate method. The current exchange rate method uses the prevailing exchange rate to translate all assets and liabilities, income and expense items. Only the company's paid-up capital or share capital items are still translated at the historical exchange rate at the date of receipt of the capital or the issuance of shares.

The paid-up capital or share capital items of only the company are still translated at the historical exchange rate at the time of receipt of the capital or the issuance of shares. However, if income and expenses are incurred in large quantities, it is usually possible to translate them at the weighted average exchange rate for the reporting period for the sake of simplicity. The translation gains and losses arising from the translation of the statements should be presented as a separate item in the shareholders' equity in the balance sheet, and they should not be included in the profit or loss for the current period.

It is one of the easiest ways to translate foreign currency statements. However, there is no theoretical basis for converting historical cost amounts at the current exchange rate under the accounting model measured at historical cost. China's exchange rate system refers to the systematic regulations made by Chinese society on the principles, methods, methods and institutions for determining, maintaining, adjusting and managing the exchange rate.

Brief introduction. It is not a floating exchange rate, a fixed exchange rate, but a capital control. Both the floating exchange rate and the fixed exchange rate are ** banks that accept any of your requests to buy or sell currencies, regardless of the amount.

In China, private individuals are not allowed to freely exchange foreign currency. So the West has always said that China's exchange rate is not market-oriented.

Chinese-style regulation and control;

Implement a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies. The RMB exchange rate is no longer pegged to a single or a dollar, but fluctuates with reference to a basket of currencies and according to market supply and demand. Here"A basket of currencies"It refers to the selection of a number of major currencies according to the actual situation of China's foreign economic development, and the corresponding weights are given to form a currency basket.

At the same time, according to the economic and financial situation at home and abroad, on the basis of market supply and demand, and with reference to a basket of currencies to calculate the changes in the RMB multilateral exchange rate index, the RMB exchange rate is managed and regulated, so as to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

Answer]: Guess town A

The direct pricing method is based on a certain unit of foreign currency as a standard to calculate how many units of domestic currency should be paid. The vast majority of countries in the world, including China, are currently slow to adopt the direct pricing method. The indirect pricing method, also known as the receivable pricing method, uses a certain unit of domestic currency as the standard to calculate a number of units of foreign currency receivable.

In option B, it is the direct pricing method; c is the indirect pricing method; Option d: Under the direct pricing method, an increase in the exchange rate indicates a depreciation of the national currency; Under the indirect pricing method, an increase in the exchange rate indicates an increase in the value of the national currency.

Answer]: B, then the spine C, D

Under the indirect pricing method, an increase in the exchange rate indicates that the value of the national currency has risen and slowed down. The statement of option a, e, is incorrect; The BCD option is true. Therefore, BCD is chosen.

Answer]: a, b, e

The exchange rate refers to the ratio of exchange between two imperial tombs, and can also be regarded as the value of one country's currency against another. Specifically, it refers to the ratio or comparison between the currency of one country and the currency of another country, or the currency of another country expressed in the currency of one country. The United States and the United Kingdom use the indirect pricing method.

The vast majority of countries in the world use the direct pricing method. A forward rate is the exchange rate at which a forward market is traded, as opposed to the spot rate. After the transaction between the buyer and seller of a foreign currency, it cannot be delivered immediately, but the agreed exchange rate to be used for delivery within a certain period of time in the future.

Answer]: A inflation account is a major factor affecting exchange rate movements. The impact of inflation on the exchange rate generally takes a period of time to appear, and when inflation, the country's export department balances the domestic cost of goods and services, which will inevitably increase the international cost of goods and services, thereby weakening its international competitiveness and affecting exports and foreign exchange earnings.

Therefore, it is said that the difference between domestic and foreign inflation will affect the long-term trend of the exchange rate, so item A is correct.

Answer]: a, c

According to the method of setting the exchange rate, there are basic exchange rates and arbitrary exchange rates. According to the comparison between the national currency and the key currency, the exchange rate for it is formulated, and the exchange rate is the basic exchange rate; The tameed exchange rate refers to the exchange rate calculated by each country based on the basic exchange rate against the US dollar, which directly reflects the ratio of value between other currencies.