Orange Coast College International Finance & Foreign Exchange Paper

1. Conduct an event study on an eastern European country using the BREXITMINI.xls file from August 30th. Please explain the economic and statistical significance of the abnormal returns for each county.
2. Go to the following websitehttps://www.oanda.com/fx-for-business/historical-ratesor FRED and select three different exchange rates (i.e., USD/EURO, USD/UK). Calculate the percent change in the exchange rate over the past month.
3. Draw a picture of a: 1) fixed exchange rate, 2) floating exchange rate, and 3) a crawling peg.

3. Image that it is the year 2050. Consider the United States and the countries it trades with the most (measured in trade volume): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares and exchange rates for these four countries are as follows:

(20 points)

Country	Share of Trade	$ per FX in 2049	$ per FX in 2050
Canada(dollar)	30%	0.8225	0.8643
Mexico(peso)	20%	0.0796	0.0688
China(yuan)	40%	0.1664	0.1573
Japan(yen)	10%	0.0305	0.0212

a. Compute the percentage change from 2049 to 2050 in the four U.S. bilateral exchange rates (defined as U.S. dollars per unit of foreign exchange, or FX) in the table provided.

1. Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2049 and 2050 (in U.S. dollars per foreign currency basket).

 

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