Discuss the flexible price monetary model of exchange rate

Essays on Discuss the flexible price monetary model of exchange rate determination and its ability to explain foreign exchange movements. How realistic is the assumption that prices are fully flexible Does this model perform well when tested empirically Essay Finance and accounting Flexible price monetary model as d by Frenkel (1979) works with assumption that prices are all flexible. The supply curve is always vertical and a shift in demand has no effect on the output. Output level cannot be adjusted up or down because it is determined by side factors of supply. Effects on foreign exchange are determined using the monetary model (Riad 2008).the government suggests the use of monetary policy and fiscal to ensure stability of exchange rate and price. Monetary model assumes equilibrium. The flexible model of price monetary assumes that the capital is mobile that is foreign and domestic bonds are considered perfect substitutes. In this regard there are negligible transaction costs, markets are very competitive and all investors hold expectations of exchange rate with a lot of certainty (Friedman Woodford 2010). In the monetary model, all the prices including the wages are considered to be flexible. The economic agents are also rational. In this model capital is mobile, PPP will hold continuously and supply of money is normally exogenous. The attention is given to the money market because there is no independent role by bonds in exchange rate determination. An increase in the domestic income will automatically lead to increase in demand for money whereas an increase in domestic interest leads to depreciation of domestic currency. The monetary assumes a stable foreign and domestic demand functions for money and excellent capital mobility (Craigwell 2009). Flexible model assumes the parity of purchasing power will always hold. The exchange rate is therefore considered to be constant. This model assumes that an increase in the output of a given country will result in depreciation of the currency. This is because real income growth increases money demand in order to finance bigger value of all transactions. According to the flexible model, increase in domestic interest will cause a decrease in the demand for the domestic money hence causing depreciation of the currency. This means that if the increase rate is caused by tightness in monetary, it will lead to home currency appreciation or if caused by inflation the result will be depreciation of home currency. Naturally monetary model states that exchange rate is always determined by three variables which are relative interest rate, money supply and a relative national output (Zhang 2007). An example of exchange rates is using two different countries that produce the same kind of goods. Wealth constraint for all domestic residents: W=M+V where M stands for the money stock and B represents bonds. The bonds are assumed to be perfect substitutes. Equilibrium in money market suggests equilibrium also in bond markets. An exchange rate is a price or prices. An exchange rate between any two currencies, according to flexible model is the ratio of the currency’s value determined by money supply basis and demand positions for money of the two given countries. An increase in the rates that are prevailing in the market will lead to a rise in foreign exchange prices. In the flexible model prices are considered to be flexible because they normally adjust very fast in all money markets. In this model domestic money is only demanded by domestic people while foreign money by foreign residents only. The exchange rate will adjust so that the level of price equilibrates supply and demand for money hence the equilibrium of money market. Demand for the money will depend positively on the income and depend negatively on nominal interest rate level. According to the parity of purchasing power, exchanged rate is a s a result of dividing home country price level with the one from foreign country. That is P=eP* , where P represents level of domestic price and P* the level of foreign price whereas e is the exchange rate (Watch 2010). The equation of money demand is shown as Md=kPy and here k is usually constant and y represents level of real income. Flexible exchange rates always protect nations from the unexpected foreign economic changes. For example they may protect a country from high foreign inflation rates. In the flexible approach, increase in money leads to higher levels of price and hence domestic currency depreciation. When the money supply is less than the domestic output there will be a lot of demand for money balances which will result to domestic currency appreciation. When there is interest rate rise, there will be less demand for the money and therefore the domestic currency will depreciate. Any increase in the supply of money will raise the level of domestic price. Dornbusch (1976) feels that the assumption of flexible price that PPP continuously holds and that real rate of exchange doesn’t change is very unrealistic (SHARAN 2012). In real life, the exchange rate has changed in the short run at some point in time. However nominal exchange rate variability has been greater. Whenever there is an increase in real domestic income, the agents are likely to reduce their expenditure on services and goods so as to increase money balances (Zhang S 2005). Equilibrium will then be restored through the parity purchasing power and appreciation of domestic currency. A decline in real domestic income will cause the opposite process of equilibrium. The assumption that prices are flexible is somewhat not realistic. This is because when exchange rates are flexible they will influence a nation to determine monetary policies on their own (Marthinsen 2014). The presence of price flexibility cannot alter any standard prescriptions for money policy in an open economy. It implies that the optimal rate of exchange rule in a price flexibility environment acts to minimize degree of flexibility of price (DOR 2012). The reason is price flexibility is expensive. In addition flexible model assumes that foreign and domestic goods are great substitutes and hence no barriers international trading of goods. For this reason assumption of flexibility of prices for the goods is tantamount to the conclusion that PPP holds all the time (Butgereit 2013) The model has been put into empirical testing. However, the results received have greatly been disappointing. During high inflation periods the models works well because the supply of money changes tend to influence prices and exchange rates (Apte 2008). The parity of purchasing power is an important aspect in the model and as noted it doesn’t hold well empirically mostly in the short run. The model has poorly performed when tested empirically. Flexible model can also be tested in the short as well as long run. One of the tests for flexible model was done by Frenkel over the high inflation rate in Germany. In all monetary models coefficients are said to be insignificant or that there are wrong signs. An example of the poor performance is if there could have been omitted variables while testing. Boughton (1987) also states that the variables explain a small portion of the changes in exchange rate which means that the rate movements can be responses to disturbances that are unf oreseen. Rogoff and Meese used the empirical method of parameters of the exchange rate models. They used â€Å"random walk† model assuming the exchange rates are always driven by random shocks that are unpredictable, this is so that a guess about exchange rate tomorrow is only today’s rate of exchange. They found that the exchange rate would not outperform the random walk (Nakaruma 2013). An empirical test was used in Taiwan to show the validity of PPP on Taiwan and other industrial countries. The data used was bilateral exchange rates in Taiwan relative to US, France and other countries and the price index of consumers in each of these countries. There is difficulty in choosing which index to use for PPP calculations. Therefore this leads to poor performance of the model. The monetary model has performed very poorly on sample forecasts and also on estimation. In the flexible model the money supply coefficient is always positive and also equal to one on money neutrality. When t he sample period for empirical testing was extended from 1978 onwards, the regressions produced disappointing results. The results by Frankel (1984), Dornbusch (1980) and Taylor (1992) yielded wrongly and hence the regressions produced poor performance on the samples (Cao, Ying 2011). It is therefore easier to conclude that the flexible model does not perform well when it is tested empirically. Bibliography Apte. 2008. International Finance. California: Tata McGraw-Hill Education. Butgereit, F. 2010. Exchange rate determination puzzle long run behavior and short run dynamics. Hamburg: Hamburg Diplomica-Verl. Cao Yong, O. W. 2011, June 25. PPP and the Monetary Model of Exchange-Rate ... - ç™ ¾Ã¥ º ¦Ã¦â€"‡å ºâ€œ. Retrieved March 4, 2015, from wenku.baidu.com/view/cc9ac6140b4e767f5acfcedf.htm Craigwell, R. ‎2009. Exchange Rate Determination in Jamaica - UWI St. Augustin. Retrieved March 4, 2015, from https://sta.uwi.edu/conferences/.../EXCHANGE_RATE_IN_JAMAICA.p... DOR, E. 2012. how do exchange rates move following an expansionary ... Retrieved March 4, 2015, from www.researchgate.net/...RATES...MONETARY.../0f3175302bfbbee3ea0... Friedman, B. M., Woodford, M. 2010. Handbook of Monetary Economics, Volume 3B. Burlington: Elsevier Science. Marthinsen, J. 2014. Managing in a Global Economy: Demystifying International Macroeconomics. Berlin: Cengage Learning. Nakamura, E. 2013, January 21. Price Rigidity: Microeconomic Evidence and ... Retrieved March 4, 2015, from www.columbia.edu/~en2198/papers/psurvey.pdf Riad, N. S. 2008. Exchange Rate Misalignment in Egypt. Chicago: ProQuest. SHARAN, V. 2012. INTERNATIONAL FINANCIAL MANAGEMENT. India: PHI Learning Pvt. Ltd. watch, E. 2010, November 23. Retrieved March 4, 2015, from www.economywatch.com/exchange-rate/monetary-approach.html Zhang, b. S. 2007. The Monetary Exchange Rate Model - Journal of Economic . Retrieved March 4, 2015, from www.e-jei.org/upload/N4M17605Q4075475.pdf Zhang, S. 2005. cointegration in a monetary model of exchange ... - ASBBS. Retrieved March 4, 2015, from www.asbbs.org/files/2005/PDF/Zhang.pdf

Deception Point Page 41 Free Essays

Making the raging river of air even more unnerving to Tolland was the slight downwind grade of the ice shelf. The ice was sloped ever so slightly toward the ocean, two miles away. Despite the sharp spikes on the Pitbull Rapido crampons attached to his boots, Tolland had the uneasy feeling that any misstep might leave him caught up in a gale and sliding down the endless icy slope. We will write a custom essay sample on Deception Point Page 41 or any similar topic only for you Order Now Norah Mangor’s two-minute course in glacier safety now seemed dangerously inadequate. Piranha Ice ax, Norah had said, fastening a lightweight T-shaped tool to each of their belts as they suited up in the habisphere. Standard blade, banana blade, semitubular blade, hammer, and adze. All you need to remember is, if anyone slips or gets caught up in a gust, grab your ax with one hand on the head and one on the shaft, ram the banana blade into the ice, and fall on it, planting your crampons. With those words of assurance, Norah Mangor had affixed YAK belay harnesses to each of them. They all donned goggles, and headed out into the afternoon darkness. Now, the four figures made their way down the glacier in a straight line with ten yards of belay rope separating each of them. Norah was in the lead position, followed by Corky, then Rachel, and Tolland as anchor. As they moved farther away from the habisphere, Tolland felt a growing uneasiness. In his inflated suit, although warm, he felt like some kind of uncoordinated space traveler trekking across a distant planet. The moon had disappeared behind thick, billowing storm clouds, plunging the ice sheet into an impenetrable blackness. The katabatic wind seemed to be getting stronger by the minute, applying a constant pressure to Tolland’s back. As his eyes strained through his goggles to make out the expansive emptiness around them, he began to perceive a true danger in this place. Redundant NASA safety precautions or not, Tolland was surprised the administrator had been willing to risk four lives out here instead of two. Especially when the additional two lives were that of a senator’s daughter and a famous astrophysicist. Tolland was not surprised to feel a protective concern for Rachel and Corky. As someone who had captained a ship, he was used to feeling responsible for those around him. â€Å"Stay behind me,† Norah shouted, her voice swallowed by the wind. â€Å"Let the sled lead the way.† The aluminum sled on which Norah was transporting her testing gear resembled an oversized Flexible Flyer. The craft was prepacked with diagnostic gear and safety accessories she’d been using on the glacier over the past few days. All of her gear-including a battery pack, safety flares, and a powerful front-mounted spotlight-was bound under a secured, plastic tarp. Despite the heavy load, the sled glided effortlessly on long, straight runners. Even on the almost imperceptible incline, the sled moved downhill on its own accord, and Norah applied a gentle restraint, almost as if allowing the sled to lead the way. Sensing the distance growing between the group and the habisphere, Tolland looked over his shoulder. Only fifty yards away, the pale curvature of the dome had all but disappeared in the blustery blackness. â€Å"You at all worried about finding our way back?† Tolland yelled. â€Å"The habisphere is almost invisi-† His words were cut short by the loud hiss of a flare igniting in Norah’s hand. The sudden red-white glow illuminated the ice shelf in a ten-yard radius all around them. Norah used her heel to dig a small impression in the surface snow, piling up a protective ridge on the upwind side of the hole. Then she rammed the flare into the indentation. â€Å"High-tech bread crumbs,† Norah shouted. â€Å"Bread crumbs?† Rachel asked, shielding her eyes from the sudden light. â€Å"Hansel and Gretel,† Norah shouted. â€Å"These flares will last an hour-plenty of time to find our way back.† With that, Norah headed out again, leading them down the glacier-into the darkness once again. 47 Gabrielle Ashe stormed out of Marjorie Tench’s office and practically knocked over a secretary in doing so. Mortified, all Gabrielle could see were the photographs-images-arms and legs intertwined. Faces filled with ecstasy. Gabrielle had no idea how the photos had been taken, but she knew damn well they were real. They had been taken in Senator Sexton’s office and seemed to have been shot from above as if by hidden camera. God help me. One of the photos showed Gabrielle and Sexton having sex directly on top of the senator’s desk, their bodies sprawled across a scatter of official-looking documents. Marjorie Tench caught up with Gabrielle outside the Map Room. Tench was carrying the red envelope of photos. â€Å"I assume from your reaction that you believe these photos are authentic?† The President’s senior adviser actually looked like she was having a good time. â€Å"I’m hoping they persuade you that our other data is accurate as well. They came from the same source.† Gabrielle felt her entire body flushing as she marched down the hall. Where the hell is the exit? Tench’s gangly legs had no trouble keeping up. â€Å"Senator Sexton swore to the world that you two are platonic associates. His televised statement was actually quite convincing.† Tench motioned smugly over her shoulder. â€Å"In fact, I have a tape in my office if you’d like to refresh your memory?† Gabrielle needed no refresher. She remembered the press conference all too well. Sexton’s denial was as adamant as it was heartfelt. â€Å"It’s unfortunate,† Tench said, sounding not at all disappointed, â€Å"but Senator Sexton looked the American people in the eye and told a bald-faced lie. The public has a right to know. And they will know. I’ll see to it personally. The only question now is how the public finds out. We believe it’s best coming from you.† Gabrielle was stunned. â€Å"You really think I’m going to help lynch my own candidate?† Tench’s face hardened. â€Å"I am trying to take the high ground here, Gabrielle. I’m giving you a chance to save everyone a lot of embarrassment by holding your head high and telling the truth. All I need is a signed statement admitting your affair.† Gabrielle stopped short. â€Å"What!† â€Å"Of course. A signed statement gives us the leverage we need to deal with the senator quietly, sparing the country this ugly mess. My offer is simple: Sign a statement for me, and these photos never need to see the light of day.† â€Å"You want a statement?† â€Å"Technically, I would need an affidavit, but we have a notary here in the building who could-â€Å" â€Å"You’re crazy.† Gabrielle was walking again. Tench stayed at her side, sounding more angry now. â€Å"Senator Sexton is going down one way or another, Gabrielle, and I’m offering you a chance to get out of this without seeing your own naked ass in the morning paper! The President is a decent man and doesn’t want these photos publicized. If you just give me an affidavit and confess to the affair on your own terms, then all of us can retain a little dignity.† â€Å"I’m not for sale.† â€Å"Well, your candidate certainly is. He’s a dangerous man, and he’s breaking the law.† â€Å"He’s breaking the law? You’re the ones breaking into offices and taking illegal surveillance pictures! Ever heard of Watergate?† â€Å"We had nothing to do with gathering this dirt. These photos came from the same source as the SFF campaign-funding information. Someone’s been watching you two very closely.† Gabrielle tore past the security desk where she had gotten her security badge. She ripped off the badge and tossed it to the wide-eyed guard. Tench was still on her tail. â€Å"You’ll need to decide fast, Ms. Ashe,† Tench said as they neared the exit. â€Å"Either bring me an affidavit admitting you slept with the senator, or at eight o’clock tonight, the president will be forced to go public with everything-Sexton’s financial dealings, the photos of you, the works. And believe me, when the public sees that you stood idly by and let Sexton lie about your relationship, you’ll go down in flames right beside him.† How to cite Deception Point Page 41, Essay examples

Charles Dickens Coursework Essay Example For Students

Charles Dickens Coursework Essay Charles Dickens was a famous writer of suspense stories. He was born at Portsmouth on the 7th February 1812. Charles was the second of eight children of John Dickens. Dickens lived in Victorian times and the sort of things that he writes about in his stories are probably from his era and the everyday lives of Victorian people. For example in the Signalman there are trains, which were new in Victorian times and an easier way of transport. They are also a much faster way of travelling from one place to another. The Victorian era was also a time when convicts were deported to Australia on prison ships. Charles Dickens was not particularly rich as his dad was arrested for debts and he must have known what a hard life was because he writes about it in so much detail. I think when Charles Wrote Great Expectations he was trying to emphasise the misfortunate children that lived in his time. Dickens is famous for suspense his suspense writing techniques. Suspense is a state of uncertainty while awaiting news for example waiting for something to happen but you dont know what. One of the ways Dickens creates Suspense is by luring the reader into an unknown atmosphere. Here are some examples in the first chapter of Great Expectations: In the first chapter of Great Expectations a boy called Pip is in a churchyard visiting the graves of his mother, father and five younger brothers. Dickens creates suspense by luring us into an unknown atmosphere. He starts describing the area around Pip in detail. Dickens gives us the impression that Pip has either not been here in a long time or hasnt been here before because of the way the area around pip is described. It is like pip is figuring out what is around the Churchyard for himself and that the dark flat wilderness beyond the Church yard, intersected with dykes and mounds and gates, with scattered cattle feeding on it was the marshes and that the low leaden line beyond was the river. As the description goes on about Pip surroundings they become more scary and worse. the distant savage lair from which the wind was rushing, was the sea, the small bundle of shivers growing afraid of it all and beginning to cry, was Pip. After Dickens has described this area around Pip and lured us into an unknown atmosphere of what is going to happen next a voice from someone shouts out to him Hold your noise! Pip is obviously scared and when a terrible voice shouts this to him it startles him. The way that Dickens describes the voice makes us think how pip must have been scared, a little boy with a horrible voice shouting orders at him Hold your noise! cried a terrible voice, as a man started up from the graves at the side of the church porch. The first few sentences that the person who is shouting at pip are not very nice and we can imagine how tense and scared Pip must have been feeling, it cant be very nice when someone threatens to cut your throat. Keep still, you little devil, or Ill cut your throat! Dickens is creating Suspense as he is describing something that is happening but as he continues we gradually find out more. This is a good technique to make the reader continue reading, as they want to find out what is going to happen next. The description of the man is quite frightening and is everything and more that we could think it might be, or the sort of image that would represent a man bellowing these commands at poor Pip. A fearful man, all in course grey, with a great iron on his leg. A man with no hat, and with broken shoes, and with an old rag tied round his head. .u15d17ad567631af789b87ed42a6c8ca8 , .u15d17ad567631af789b87ed42a6c8ca8 .postImageUrl , .u15d17ad567631af789b87ed42a6c8ca8 .centered-text-area { min-height: 80px; position: relative; } .u15d17ad567631af789b87ed42a6c8ca8 , .u15d17ad567631af789b87ed42a6c8ca8:hover , .u15d17ad567631af789b87ed42a6c8ca8:visited , .u15d17ad567631af789b87ed42a6c8ca8:active { border:0!important; } .u15d17ad567631af789b87ed42a6c8ca8 .clearfix:after { content: ""; display: table; clear: both; } .u15d17ad567631af789b87ed42a6c8ca8 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u15d17ad567631af789b87ed42a6c8ca8:active , .u15d17ad567631af789b87ed42a6c8ca8:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u15d17ad567631af789b87ed42a6c8ca8 .centered-text-area { width: 100%; position: relative ; } .u15d17ad567631af789b87ed42a6c8ca8 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u15d17ad567631af789b87ed42a6c8ca8 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u15d17ad567631af789b87ed42a6c8ca8 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u15d17ad567631af789b87ed42a6c8ca8:hover .ctaButton { background-color: #34495E!important; } .u15d17ad567631af789b87ed42a6c8ca8 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u15d17ad567631af789b87ed42a6c8ca8 .u15d17ad567631af789b87ed42a6c8ca8-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u15d17ad567631af789b87ed42a6c8ca8:after { content: ""; display: block; clear: both; } READ: Elevator History EssayA man who had been soaked in water, and smothered in mud, and lamed by stones, and cut by flints, and stung by nettles, and torn by briars; who limped, and shivered and glared and growled; and whose teeth chattered when he seized me by the chin. This is a very descriptive piece of text and bring a very good visual image of what the person looks like and this is also an important factor in the way Dickens creates Suspense Visual images These are always important when building up Suspense as it makes the reader more able to visualise what is happening and/or going to happen. It makes us see what is being described and think of all the possibilities of what could happen next. Dickens describes Pip and The Convict in the Churchyard and the Convict is asking Pip what his name is and where he lives. The Convict is obviously hungry because when he tips Pip upside down and a piece of bread falls out Dickens describes the way in which pip saw him eating he ate the bread ravenously. You can tell the man was obviously hungry as he made remarks about eating pips cheeks. You young dog, said the man, licking his lips, what fat cheeks you ha got. And Darn me if I couldnt eat em, The convict isnt stupid and we can tell this because when Pip tells him that he lives with his sister Mrs Joe Gargery wife of Joe Gargery the Blacksmith he looks down at the iron on his leg and thinks how he can get rid of the iron. After Pip says this, his actions towards Pip become more threatening. Now lookee here, he said the question being whether you live. You know what a file is? Yes Sir And you know what wittles is Yes sir After he says this he becomes even more threatening so Pip will do what he wants You get me a file  and you get me wittles. You bring em both to me. or Ill have your heart and liver out The Convict is clever and we can tell this because he makes out to have someone else with him. A young man and he tells pip that the young man is worse than him so that Pip would be very frightened and do what the Convict wants him to do Now, I aint alone, as you may think I am. There is a young man hid with me, in comparison with which I am an angel. That young man hears the words I speak. That young man has a secret way percoolier to himself, of getting a boy, and at his heart and at his liver. It is in wain for a boy to attempt to hide himself from that young man. A boy may lock his door, may be warm in bed, may tuck himself up, may draw the clothes up over his head, may think himself comfortable and safe, but that young man will softly creep and creep his way to him and tear him open. After the convict says this we are wondering what he will say next as this piece of writing is very strange. It starts nicely but to scare pip it finishes terribly by the convict saying a young man will tear open a young boy.