In a previous publication (No. No. 38 FOREX MAGAZINE), we considered that is the country's balance of payments. Now it is time to explore its individual lines and their relationship with other economic indicators.
Trade balance, interest rate and exchange rate
In one of the first publications on the study of FA, we examined the general case of interaction of these variables. Reducing the interest rate should lead to an increase in net foreign investment, reducing the national currency and increasing trade surplus. And vice versa.
To believe, to the extent consistent with the theory of practice, you can use the balance of payments data and dollar-weighted index of major currencies. All the necessary statistics can be found at: http://www.research.stlouisfed.org
Tab. 1. An analysis of some indicators of the balance of payments
We will be interested in the line of exports, imports, trade balance and current account. Build their graphics and visibility caused them to schedule the dollar index.
In such an analysis of the schedule is hardly possible, due to the following. In recent decades, the role of international trade in the economies of all countries without exception increased, and consequently, the volume of exports and imports grew rapidly. It turns out that to compare the situation now and twenty years ago does not use absolute values.
Looking at the schedule in such a way, we can not say with certainty how real it was, for example, reducing the negative trade balance in the late eighties or early nineties, growth.
For a reliable analysis, it was a good idea to include in it more of a figure who could serve as a kind of scale.
On the role of such a measure well suited gross domestic product (GDP, GDP).
The values of exports, imports, trade balance and current account more correctly viewed as a percentage of GDP. After simple mathematical operations we get the following schedule. The graph also plotted the data on interest rates on federal funds, calculated as the average values of the rates for the year.
Looking at the schedule, we can say that in general the theoretical assumptions are confirmed by historical data. For example, the decline rate in the second half of the eighties was accompanied by a decline in the dollar and rising net exports. A rise in interest rates during the nineties was accompanied by a rise in the dollar and a significant increase in the negative trade balance.
Thus, in the long run, with the presentation on the aims and methods of government monetary (monetary) policy, you can fairly confidently predict the long-term trends. Moreover, given the fact that changing the discount rate and the beginning of a new trend in the exchange rate, there is some time lag (it can be seen on the graph).
But here we have trudnoobyasnimy paradox. In the 2001-2003 year we are seeing decline rates in the fall of the dollar (which is logical) and the growth of the negative trade balance (which is unclear). What is it - the market has changed in recent years so that the theory ceases to work, or is it just an exception proves the rule?
From this phenomenon, we try to understand the following publications.
Trade balance, interest rate and exchange rate
In one of the first publications on the study of FA, we examined the general case of interaction of these variables. Reducing the interest rate should lead to an increase in net foreign investment, reducing the national currency and increasing trade surplus. And vice versa.
To believe, to the extent consistent with the theory of practice, you can use the balance of payments data and dollar-weighted index of major currencies. All the necessary statistics can be found at: http://www.research.stlouisfed.org
Tab. 1. An analysis of some indicators of the balance of paymentsWe will be interested in the line of exports, imports, trade balance and current account. Build their graphics and visibility caused them to schedule the dollar index.
In such an analysis of the schedule is hardly possible, due to the following. In recent decades, the role of international trade in the economies of all countries without exception increased, and consequently, the volume of exports and imports grew rapidly. It turns out that to compare the situation now and twenty years ago does not use absolute values.Looking at the schedule in such a way, we can not say with certainty how real it was, for example, reducing the negative trade balance in the late eighties or early nineties, growth.
For a reliable analysis, it was a good idea to include in it more of a figure who could serve as a kind of scale.
On the role of such a measure well suited gross domestic product (GDP, GDP).
The values of exports, imports, trade balance and current account more correctly viewed as a percentage of GDP. After simple mathematical operations we get the following schedule. The graph also plotted the data on interest rates on federal funds, calculated as the average values of the rates for the year.
Looking at the schedule, we can say that in general the theoretical assumptions are confirmed by historical data. For example, the decline rate in the second half of the eighties was accompanied by a decline in the dollar and rising net exports. A rise in interest rates during the nineties was accompanied by a rise in the dollar and a significant increase in the negative trade balance.Thus, in the long run, with the presentation on the aims and methods of government monetary (monetary) policy, you can fairly confidently predict the long-term trends. Moreover, given the fact that changing the discount rate and the beginning of a new trend in the exchange rate, there is some time lag (it can be seen on the graph).
But here we have trudnoobyasnimy paradox. In the 2001-2003 year we are seeing decline rates in the fall of the dollar (which is logical) and the growth of the negative trade balance (which is unclear). What is it - the market has changed in recent years so that the theory ceases to work, or is it just an exception proves the rule?
From this phenomenon, we try to understand the following publications.
Andrew Khamidullin
to Forex Magazine
fxtrade@tomsk.ru
to Forex Magazine
fxtrade@tomsk.ru
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