Exchange Rates辅导、讲解CS/Python程序、辅导C/C++设计、讲解point-form

Project 3: Exchange Rates

Due Nov 16

This is an individual project in which you will investigate exchange rates for a particular country.

The report is in point-form and is similar in structure to your first one. The following are the

required task

1. Pick a country that excludes Euro, G7, Mexico, Canada and China and obtain its exports,

imports, a short term interest rate and exchange rate (ensure that it is operating under a

flexible rate) against the US (monthly data)

a. For those wishing to choose emerging nations, there is unlikely to be a bond

market with suitable interest rates so ignore everything below involving interest

rates but….

b. In these cases I want you to focus on purchasing power parity considerations and

in particular go to the World Bank and see whether there is a value for the 2 years

calculated. Discuss this in relation to the exchange rates you download

2. For this country obtain its CPI, US short rate (like I have in my do file) and a short term

domestic rate interest rate (say 90 day or less) for its government securities

3. Do some back ground work on the history of the country’s current account and its degree

of openness. Comment on this and its changes over time.

4. Comment on the movement of the exchange rate and the differential of the domestic and

US rates.

5. Forecast exchange rates with the interest rate differential using the interest arbitrage

equation. Explain what it is you are doing.

6. Is there any leading commodity price that can explain its currency movement like Canada

for oil? For most countries there is no leading commodity but see if you can find some

price index of leading commodity with the major trading partner.,

7. Investigate the time series properties of your exchange rate and show its stationary for

first differences. Explain results

8. Graph Purchasing Power Parity relation (real exchange rate) and relative PPP against the

US and comment on the degree to which it might hold (like I have done in

trade_exchange.do)

Evaluation (Project 20%)

1. Report (15%)

a. Background research on country and real trade analysis (5%)

b. Analytical work on (10%)

i. exchange rate properties

ii. movement with interest rate differentials,

iii. forecasting through interest arbitrage

iv. PPP absolute and relative

2. Stata do file (5%)

Hand-in via dropbox the report and stata.do file