《跨国公司财务管理第七版工商管理经典译丛会计与财务系列教学课件夏皮罗ch04》由会员分享，可在线阅读，更多相关《跨国公司财务管理第七版工商管理经典译丛会计与财务系列教学课件夏皮罗ch04（40页珍藏版）》请在金锄头文库上搜索。
1、在线教务辅导网：在线教务辅导网： :/教材其余课件及动画素材请查阅在线教务辅导网教材其余课件及动画素材请查阅在线教务辅导网QQ:349134187 或者直接输入下面地址：或者直接输入下面地址：CHAPTER 4International Finance and Currency: Parity Conditions 2PART I. ARBITRAGE AND THE LAW OF ONE PRICEI.THE LAW OF ONE PRICEA. Law states:Identical goods sell for the same price worldwide. ARBITRAGE A
2、ND THE LAW OF ONE PRICEB.Theoretical basis:If the prices after exchange-rate adjustment were not equal, arbitrage in the goods worldwide ensures eventually it will.ARBITRAGE AND THE LAW OF ONE PRICEC.Five Parity Conditions Result From These Arbitrage Activities1.Purchasing Power Parity (PPP)2.The Fi
3、sher Effect (FE)3.The International Fisher Effect(IFE)4.Interest Rate Parity (IRP)5.Unbiased Forward Rate (UFR) ARBITRAGE AND THE LAW OF ONE PRICED.Five Parity Conditions Linked by1.The adjustment of variousrates and prices to inflation.2.The notion that money should have no effect on real variables
4、 (since they have been adjusted for price changes).ARBITRAGE AND THE LAW OF ONE PRICEE.Inflation and home currency depreciation:1.jointly determined by the growth of domestic money supply;2.Relative to the growth ofdomestic money demand.ARBITRAGE AND THE LAW OF ONE PRICEF. THE LAW OF ONE PRICE- enfo
5、rced by international arbitrage.PART II. PURCHASING POWER PARITYI.THE THEORY OF PURCHASINGPOWER PARITY: states that spot exchange rates between currencies will change to the differential in inflation rates between countries.PURCHASING POWER PARITYII. ABSOLUTE PURCHASING POWER PARITYA. Price levels a
6、djusted for exchange rates should beequal between countriesPURCHASING POWER PARITYII. ABSOLUTE PURCHASING POWER PARITYB. One unit of currency has same purchasing power globally.PURCHASING POWER PARITYIII. RELATIVE PURCHASING POWER PARITYA. states that the exchange rate of one currency against anothe
7、r will adjust to reflect changes in the price levels of the two countries.PURCHASING POWER PARITY1.In mathematical terms: where et = future spot rate e0= spot rate ih= home inflation if = foreign inflation t= the time periodPURCHASING POWER PARITY2.If purchasing power parity is expected to hold, the
8、n the bestprediction for the one-periodspot rate should bePURCHASING POWER PARITY3. A more simplified but less precise relationship is that is, the percentage change should be approximately equal to the inflation rate differential. PURCHASING POWER PARITY4.PPP says the currency with the higher infla
9、tion rate is expected to depreciate relative to the currency with the lower rate of inflation.PURCHASING POWER PARITYB.Real Exchange Rates:the quoted or nominal rate adjusted for a countrys inflation rate isPURCHASING POWER PARITYC.Real exchange rates1. If exchange rates adjust to inflation differen
10、tial, PPP states that real exchange rates stay the same. PURCHASING POWER PARITYC.Real exchange rates 2.Competitive positions:domestic and foreign firmsare unaffected.PART III.THE FISHER EFFECT (FE)I.THE FISHER EFFECTstates that nominal interest rates (r) are a function of the real interest rate (a)
11、 and a premium (i) for inflation expectations. R = a + iTHE FISHER EFFECTB.Real Rates of Interest1. Should tend toward equality everywhere through arbitrage.2. With no government interference nominal rates vary by inflation differential orrh - rf = ih - ifTHE FISHER EFFECTC.According to the Fisher E
12、ffect,countries with higher inflation rates have higher interest rates.THE FISHER EFFECTD.Due to capital market integration globally, interest rate differentials are eroding.PART IV. THE INTERNATIONAL FISHER EFFECT (IFE)I.IFE STATES:A. the spot rate adjusts to the interest rate differential between
13、two countries.THE INTERNATIONAL FISHER EFFECTIFE = PPP + FETHE INTERNATIONAL FISHER EFFECTB.Fisher postulated1. The nominal interest rate differential should reflect the inflation rate differential.THE INTERNATIONAL FISHER EFFECTB.Fisher also postulated that2.Expected rates of return are equal in th
14、e absence of government intervention.THE INTERNATIONAL FISHER EFFECTC. Simplified IFE equation:(if rf is relatively small) THE INTERNATIONAL FISHER EFFECTD. Implications of IFE1.Currency with the lower interest rate is expected to appreciate relative to the onewith a higher rate.THE INTERNATIONAL FI
15、SHER EFFECTD. Implications of IFE2.Financial market arbitrage:insures interest rate differential is an unbiased predictor of change in future spot rate. PART VI. INTEREST RATE PARITY THEORYI. INTRODUCTIONA. The Theory states:the forward rate (F) differs from the spot rate (S) at equilibrium by an am
16、ount equal to the interest differential (rh - rf) between two countries.INTEREST RATE PARITY THEORY2. The forward premium ordiscount equals the interestrate differential. (F - S)/S = (rh - rf) where rh = the home raterf = the foreign rateINTEREST RATE PARITY THEORY3.In equilibrium, returns oncurrenc
17、ies will be the samei. e. No profit will be realizedand interest parity existswhich can be writtenINTEREST RATE PARITY THEORYB.Covered Interest Arbitrage1. Conditions required:interest rate differential doesnot equal the forward premium or discount.2. Funds will move to a countrywith a more attracti
18、ve rate.INTEREST RATE PARITY THEORY3. Market pressures develop:a.As one currency is more demanded spot and sold forward.b. Inflow of fund depresses interest rates.c.Parity eventually reached.INTEREST RATE PARITY THEORYC.Summary:Interest Rate Parity states:1.Higher interest rates on a currency offset
19、 by forward discounts.2.Lower interest rates are offset by forward premiums. PART VI. THE RELATIONSHIP BETWEEN THE FORWARD AND THE FUTURE SPOT RATEI.THE UNBIASED FORWARD RATEA. States that if the forward rate is unbiased, then it should reflect the expected future spot rate.B. Stated asft = etPART V
20、I. CURRENCYFORECASTINGI. FORECASTING MODELSA. Created to forecast exchange rates in addition to parity conditions.B. Two types of forecast:1.Market-based 2.Model-basedCURRENCY FORECASTINGMARKET-BASED FORECASTS:derived from market indicators.A. The current forward rate contains implicit information a
21、bout exchange rate changes for one year.B. Interest rate differentials may be used to predict exchange rates beyond one year.CURRENCY FORECASTINGMODEL-BASED FORECASTS:include fundamental and technical analysis.A. Fundamental relies on key macroeconomic variables and policies which most like affect exchange rates.B. Technical relies on use of 1. Historical volume and price data2. Charting and trend analysis
