Exchange Rates and the Foreign Exchange Market module (BU42027)
Develop an understanding of foreign exchange markets and exchange rate determination. Explore key theoretical and empirical tools, applying them to policy analysis and financial decision-making
Semester 2
The foreign exchange market is one of the largest and most liquid financial markets in the world. This module gives you the tools to understand and analyse it.
You'll start by examining the structure of the FX market, including exchange rate quotations, conventions, and arbitrage mechanisms. From there, you'll study the key theoretical frameworks: Purchasing Power Parity and the monetary approach, Interest Parity and the asset approach, and open-economy macroeconomic models of exchange rate determination.
The module also covers exchange rate regimes and the policy choices governments face, and the causes and consequences of exchange rate crises.
Throughout, you'll develop your ability to interpret empirical data, test theories against evidence, and apply theoretical concepts to real financial and policy scenarios. Two individual assignments give you the chance to work with real data and develop your analytical writing.
What you will learn
In this module, you will:
- Understand the structure and operation of foreign exchange markets, including quotations, conventions, and arbitrage
- Explore the key theories and models of exchange rate determination
- Examine different exchange rate regimes and their policy implications
- Analyse and interpret empirical data related to exchange rates
- Apply theoretical models to real-world economic scenarios and evaluate their validity
By the end of this module, you will be able to:
- Explain the structure and operation of foreign exchange markets, exchange rate quotations, and exchange rate regimes
- Demonstrate understanding of key exchange rate theories and models
- Analyse and interpret empirical data related to exchange rates
- Evaluate the validity and applicability of different theoretical models in light of empirical evidence
- Apply theoretical concepts of exchange rate determination to real-world economic scenarios and communicate findings effectively
Assignments / assessments
- Individual assignment 1 (50%)
- Individual assignment 2 (50%)
This module does not have a final exam.
Teaching methods / timetable
- Weekly lectures
- Tutorials with problem-solving exercises and empirical data analysis
Regular office hours are available with lecturers and tutors for additional support and guidance.
Courses
This module is available on the following courses: