Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Econ3331-International Finance
Winter 2020
Final Exam
Overall Instructions
- Read the problems carefully.
- The weight of each problem is displayed next to the problem.
- When you are asked to provide qualitative effects, an analysis based on graphs is sufficient.
- Make sure that you provide an explanation for your answers. For example, if your answer involves a graph, you should explain in writing what happens in the graph.
- No collaboration is allowed.
- Empirical part: use the data based on your LAST DIGIT of Banner number.
- You have 24 hrs.
- Total number of pages (including cover page): 5
Submission Instructions
- Submit your answers electronically in Brightspace: Final Exam Submission Folder.
- Submit 3 files:
Theory Questions (Essay and Problem Solving).
You do not need to type down the answers, but you will need to scan (or take a picture) of all the pages and submit an e-copy.
Need to have your name and banner number in every page of answers. Try to combine all your work in a single file.
Name: “LastNameFirstName_FinalExamTheory.pdf” Empirical Analysis
Submit two files:
- Typed answers to the questions, including any requested graphs (see mock exam).
Name: “LastNameFirstName_FinalExamEmpirical.pdf”
- Excel file with calculations
Name: “LastNameFirstName_FinalExamEmpCalc.xlsx”
Questions During the Exam
- Online (Collaborate/Brightspace): Monday April 13th, 08:30am-10:30am (AST)
- By email: expect answers within 2 hours, no email after 11:00pm (AST)
1
Part I: Theory [60%]
Problem 1 (17%)
In this problem, you will explore the different effects of changes in money supply under different assumptions regarding the speed of price adjustment.
Assume that at the beginning there is no growth in money supply, i.e. money supply is a constant number.
- Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant. Assume that prices adjust slowly (ignore the PPP theory). (5%)
- Plot the time paths of your results for the following variables: (4%)
- S. Money supply
- The dollar interest rate.
- The U.S. price level
- The dollar/euro exchange rate
- What will be the effect of a permanent increase in the U.S. money supply in the exchange rate, if prices are flexible? Follow the monetary approach to exchange rates, i.e., assume that PPP holds. (3%)
- Now consider the case of a permanent increase in the growth rate of the U.S. money supply. What are the effects in the following selected economic variables?
- S. Money supply
- The dollar interest rate.
- The U.S. price level
- The dollar/euro exchange rate
Explain in detail your findings. Graph the long-run time paths of the variables. (5%)
Problem 2 (20%)
Consider the DD-AA model for the determination of exchange rate of a small country and assume that its economy is originally set in producing its potential output and sits on its desired level of Current Account.
- What will be the effect of a temporary increase in foreign income, as a result of the foreign government’s increased spending, under a floating exchange rate regime? (4%)
- What will be the effect of a temporary increase in foreign income, as a result of the foreign government’s increased spending, under a fixed exchange rate regime? (4%)
- What will be the effect of a permanent increase in foreign income, as a result of the foreign government’s increased spending, under a floating exchange rate regime? (4%)
- What will be the effect of a permanent increase in foreign income, as a result of the foreign government’s increased spending, under a fixed exchange rate regime? (4%)
- How the Current Account will be affected in each of these scenarios? (4%)
Use different graphs to show the above effects.
2
Problem 3 (13%)
Consider the DD-AA model for the determination of exchange rate of a small country, who is a major oil producer, and assume that its economy is originally set in producing at its potential output.
- What will be the impact on the country’s exchange rate if a world crisis leads to a large increase in the price of oil? Consider also the effect that such an increase will have on the country’s oil producing sector. [7%]
- If the country maintains a fixed exchange rate regime, what do you expect to happen? What do you believe the impact will be on the other sectors of the economy? Discuss your findings. [6%]
Assume that the rest of the world is heavily depended on oil as an input for its production, whereas this is not the case for the country in question.
Essay Question (10%)
Discuss briefly the main reasons that lead to the 2008 Financial crisis.
Focus now on the role that regulatory authorities and/or politicians played. How important was it in your opinion? What was their response in the aftermath of the crisis? Do you agree with the statement that the banking regulatory framework is counter-cyclical?
Part II: Empirical [40%]
Consider the Data located at the Worksheet whose name is the same as the last digit in your Banner number (e.g. if your B no is B00111112, you should take the series located at the Worksheet 2).
You are given the following information for the period of 1998Q1 to 2015Q1:
E: exchange rate expressed as units of domestic currency required to buy one unit of foreign currency (standard definition used in the class)
R: domestic 1 period (3-month) nominal interest rate
P: domestic Consumer Price Index (CPI)
Y: domestic Real Gross Domestic Product (GDP), expressed in units of domestic currency
CA: domestic Current Accounts expressed as a % of GDP
R*: foreign 1 period (3-month) nominal interest rate
P*: foreign Consumer Price Index (CPI)
Y*: foreign Real Gross Domestic Product (GDP), expressed in units of foreign currency
CA*: foreign Current Accounts expressed as a % of GDP
ALL GROWTH RATES FOR THE ANALYSIS ARE QUARTER-OVER_QUARTER.
r2000 Q 3 X2000 Q 3 X2000 Q 2 100%
X2000Q2
BE MINDFUL ABOUT THE TIME INDEXING OF THE SERIES YOU CREATE.
Questions
- Graph the difference between the two countries’ real GDP growth rates over time. What is the average difference in the growth rates for the two countries? [5%]
- (Examining the validity of the Interest Rate Parity). Consider the formula for Uncovered Interest Rate parity and using the interest rate differential, and the current exchange rate, calculate the expected one-period ahead exchange rate. Calculate the correlation between the expected exchange rate and the realized (actual) exchange rate and discuss if the UIP holds or not. [10%]
[Be mindful about the timing of the interest rate differential and the exchange rate growth rate. Check the UIP formula.]
- Using the two series obtained in (2), calculate the risk premium, and provide its graph over time. Can you identify any relationship to the Real GDP growth differential? [5%]
- (Examining the validity of the Purchasing Power Parity). Calculate quarter-over-quarter inflation rates for both countries and construct the inflation differential. Using the correlation between the two series discuss if the relative PPP holds or not. [10%]
[Be mindful about the timing of the inflation differential and the exchange rate growth rate. Check the relative PPP formula.]
- (Examining the validity of the Marshall-Lerner condition). Calculate the following series for the domestic and foreign Current Accounts: [10%]
- Quarter-over-quarter change (e.g. CA2001 Q 4 CA2001 Q 3 )
- Year-over-year change (e.g. CA2001 Q 4 CA2000 Q 4 )
Find the correlations between: i) the exchange rate growth rate with the one quarter ahead change in Current Account, and the ii) the exchange rate growth rate with the one year ahead change in Current Account, for both the home and foreign country. Based on your calculations, does the Marshall-Lerner outcome hold for the home country? How about the foreign country?
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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