oussama94
05-29-2017, 00:15
Among the major,
actively traded currencies this model has not yet shown itself to be a convincing,
single determinant for exchange rate movements. While this theory
can be used with more confidence in underdeveloped countries where
hot money rushes in and out of emerging markets with enormous effect,
there are still too many variables not accounted for by the currency substitution
model. For example, using the earlier yen illustration, even though
Japan may try to spark inflation with its securities buyback plan, it still
has an enormous current account surplus that will continually prop up the
yen. Also, Japan has numerous political land mines it must avoid in its own
neighborhood, and should Japan make it clear it is trying to devalue its currency
there will be enormous repercussions. These are just two of many
factors the substitution model does not take into consideration. However,
this model (like numerous other currency models) should be considered
part of an overall balanced ** forecasting diet.
actively traded currencies this model has not yet shown itself to be a convincing,
single determinant for exchange rate movements. While this theory
can be used with more confidence in underdeveloped countries where
hot money rushes in and out of emerging markets with enormous effect,
there are still too many variables not accounted for by the currency substitution
model. For example, using the earlier yen illustration, even though
Japan may try to spark inflation with its securities buyback plan, it still
has an enormous current account surplus that will continually prop up the
yen. Also, Japan has numerous political land mines it must avoid in its own
neighborhood, and should Japan make it clear it is trying to devalue its currency
there will be enormous repercussions. These are just two of many
factors the substitution model does not take into consideration. However,
this model (like numerous other currency models) should be considered
part of an overall balanced ** forecasting diet.