ANDCURRENCYFORECASTING(跨国公司财务管理-Joseph

1MultinationalFinancialManagementAlanShapiro7thEditionJ.Wiley&SonsPowerPointsbyJosephF.Greco,Ph.D.CaliforniaStateUniversity,Fullerton2CHAPTER4PARITYCONDITIONSANDCURRENCYFORECASTING3CHAPTEROVERVIEWI.ARBITRAGEANDTHELAWOFONEPRICEII.PURCHASINGPOWERPARITYIII.THEFISHEREFFECTIV.THEINTERNATIONALFISHEREFFECTV.INTERESTRATEPARITYTHEORYVI.THERELATIONSHIPBETWEENTHEFORWARDANDFUTURESPOTRATEVII.CURRENCYFORECASTING4PARTI.ARBITRAGEANDTHELAWOFONEPRICEI.THELAWOFONEPRICEA.Lawstates:Identicalgoodssellforthesamepriceworldwide.5ARBITRAGEANDTHELAWOFONEPRICEB.Theoreticalbasis:Ifthepriceafterexchange-rateadjustmentwerenotequal,arbitrageinthegoodsworldwideensureseventuallyitwill.6ARBITRAGEANDTHELAWOFONEPRICEC.FiveParityConditionsResultFromTheseArbitrageActivities1.PurchasingPowerParity(PPP)2.TheFisherEffect(FE)3.TheInternationalFisherEffect(IFE)4.InterestRateParity(IRP)5.UnbiasedForwardRate(UFR)7ARBITRAGEANDTHELAWOFONEPRICED.FiveParityConditionsLinkedby1.Theadjustmentofvariousratesandpricestoinflation.8ARBITRAGEANDTHELAWOFONEPRICE2.Thenotionthatmoneyshouldhavenoeffectonrealvariables(sincetheyhavebeenadjustedforpricechanges).9ARBITRAGEANDTHELAWOFONEPRICEE.Inflationandhomecurrencydepreciation:1.jointlydeterminedbythegrowthofdomesticmoneysupply;2.Relativetothegrowthofdomesticmoneydemand.10ARBITRAGEANDTHELAWOFONEPRICEF.THELAWOFONEPRICE-enforcedbyinternationalarbitrage.11PARTII.PURCHASINGPOWERPARITYI.THETHEORYOFPURCHASINGPOWERPARITY:statesthatspotexchangeratesbetweencurrencieswillchangetothedifferentialininflationratesbetweencountries.12PURCHASINGPOWERPARITYII.ABSOLUTEPURCHASINGPOWERPARITYA.Pricelevelsadjustedforexchangeratesshouldbeequalbetweencountries13PURCHASINGPOWERPARITYII.ABSOLUTEPURCHASINGPOWERPARITYB.Oneunitofcurrencyhassamepurchasingpowerglobally.14PURCHASINGPOWERPARITYIII.RELATIVEPURCHASINGPOWERPARITYA.statesthattheexchangerateofonecurrencyagainstanotherwilladjusttoreflectchangesinthepricelevelsofthetwocountries.15PURCHASINGPOWERPARITY1.Inmathematicalterms:whereet=futurespotratee0=spotrateih=homeinflationif=foreigninflationt=thetimeperiodtfthtiiee11016PURCHASINGPOWERPARITY2.Ifpurchasingpowerparityisexpectedtohold,thenthebestpredictionfortheone-periodspotrateshouldbetfthtiiee11017PURCHASINGPOWERPARITY3.Amoresimplifiedbutlesspreciserelationshipisthatis,thepercentagechangeshouldbeapproximatelyequaltotheinflationratedifferential.fhtiiee018PURCHASINGPOWERPARITY4.PPPsaysthecurrencywiththehigherinflationrateisexpectedtodepreciaterelativetothecurrencywiththelowerrateofinflation.19PURCHASINGPOWERPARITYB.RealExchangeRates:thequotedornominalrateadjustedforacountry’sinflationrateisthtfttiiee)1()1('20PURCHASINGPOWERPARITYC.Realexchangerates1.Ifexchangeratesadjusttoinflationdifferential,PPPstatesthatrealexchangeratesstaythesame.21PURCHASINGPOWERPARITYC.Realexchangerates2.Competitivepositions:domesticandforeignfirmsareunaffected.22PARTIII.THEFISHEREFFECT(FE)I.THEFISHEREFFECTstatesthatnominalinterestrates(r)areafunctionoftherealinterestrate(a)andapremium(i)forinflationexpectations.R=a+i23THEFISHEREFFECTB.RealRatesofInterest1.Shouldtendtowardequalityeverywherethrougharbitrage.2.Withnogovernmentinterferencenominalratesvarybyinflationdifferentialorrh-rf=ih-if24THEFISHEREFFECTC.AccordingtotheFisherEffect,countrieswithhigherinflationrateshavehigherinterestrates.25THEFISHEREFFECTD.Duetocapitalmarketintegrationglobally,interestratedifferentialsareeroding.26PARTIV.THEINTERNATIONALFISHEREFFECT(IFE)I.IFESTATES:A.thespotrateadjuststotheinterestratedifferentialbetweentwocountries.27THEINTERNATIONALFISHEREFFECTIFE=PPP+FEtfthtrree)1()1(028THEINTERNATIONALFISHEREFFECTB.Fisherpostulated1.Thenominalinterestratedifferentialshouldreflecttheinflationratedifferential.29THEINTERNATIONALFISHEREFFECTB.Fisherpostulated2.Expectedratesofreturnareequalintheabsenceofgovernmentintervention.30THEINTERNATIONALFISHEREFFECTC.SimplifiedIFEequation:(ifrfisrelativelysmall)100hfeerre31THEINTERNATIONALFISHEREFFECTD.ImplicationsofIFE1.Currencywiththelowerinterestrateexpectedtoappreciaterelativetoonewithahigherrate.32THEINTERNATIONALFISHEREFFECTD.ImplicationsofIFE2.Financialmarketarbitrage:insuresinterestratedifferentialisanunbiasedpredictorofchangeinfuturespotrate.33PARTVI.INTERESTRATEPARITYTHEORYI.INTRODUCTIONA.TheTheorystates:theforwardrate(F)differsfromthespotrate(S)atequilibriumbyanamountequaltotheinterestdifferential(rh-rf)betweentwocountries.34INTERESTRATEPARITYTHEORY2.Theforwardpremiumordiscountequalstheinterestratedifferential.(F-S)/S=(rh-rf)whererh=thehomeraterf=theforeignrate35INTERESTRATEPARITYTHEORY3.Inequilibrium,returnsoncurrencieswillbethesamei.e.Noprofitwillberealizedandinterestparityexistswhichcanbewritten(1+rh)=F(1+rf)S36INTERESTRATEPARITYTHEORYB.CoveredInterestArbitrage1.Conditionsrequired:interestratedifferentialdoesnotequaltheforwardpremiumordiscount.2.Fundswillmovetoacountrywithamoreattractiverate.37INTERESTRATEPARITYTHEORY3.Marketpressuresdevelop:a.Asonecurrencyismoredemandedspotandsoldforward.b.Inflowoffunddepressesinterestrates.c.Pari