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    Forecast Exchange Rates: International Monetary Fund

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    (a) Assume role of a CFO of a mid-size company that exports to Europe. Your company received a contract to supply components to a German manufacturer. Discussed approaches to accurately forecast exchange rates. Identify implications exchange-rate company's marketing, production, financial decisions.

    (b) Research a recent article on the international monetary Fund; perform a online search for an article. Read the article, and think about how the topic relates to the concepts discussed in Chapter 10(attached). Write a brief summary report(1page), and discuss how the article related to the IMF's position of influence on individual nation's economic policy. You should incorporate terminology and concepts included in the chapter to summarize the article. Cite sources used.

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    Solution Preview

    a. Exchange rate forecasting is done in corporate and business setting by using econometric, judgmental and technical methods. The econometric method uses a single regression equation employing independent variables which are economic in nature and dependent variable which is the exchange rate. The determination of independent variables is prompted by economic theories such as purchasing power parity, monetary theory, portfolio balance theory, etc.

    In the judgmental method, both quantitative variables like inflation rate, money supply and qualitative variables like changes in tax policy, overselling or underselling of currency are incorporated.

    In technical analysis, past movements in exchange rate is used to determine future exchange rate. Other factors have no role in the determination of exchange ...

    Solution Summary

    The solution discusses forecast exchange rate, based on an article on international monetary fund.