Ett flertal teorier försöker förklara de starka fluktuationer växelkurser under rörlig regim uppvisar vid monetära policychocker. En av dessa teorier, Rüdiger Dornbusch:s överreaktionsmodell, menar att fluktuationer kan förklaras av skillnader i den tid varurespektive kapitalmarknaden behöver för att anpassa sig till det förändrade penningutbudet. Denna studie avser utreda modellens empiriska förklaringsförmåga genom att applicera den på fallet Schweiz 2015, där en stor och oväntad centralbanksåtgärd skapade kraftiga reaktioner på valutamarknaden. Genom ett t-test testas den potentiella överreaktionens signifikans. T-statistikan påvisar starkt stöd för att växelkursen rör sig i enlighet med Dornbusch:s modell. Diverse känslighetstester genomförs, om vilket samtliga vidimerar resultaten.

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Due to globalization investors have increasing opportunities to invest on international markets for diversification purposes. This thesis illustrates the added risks of investing internationally due to volatile exchange rates. The purpose is to analyze how a volatile exchange rate affect the risk and return of a portfolio invested in Sweden, when the investor is located in Japan, United Kingdom or the USA. To analyze the effect of exchange rate volatility the focus is on a portfolio consisting of Swedish stocks from the Stockholm Stock Exchange (SSE) O-list. First the risk and return to a hypothetical Swedish investor not exposed to exchange rate volatility is calculated. Then the effects the exchange rates had on the risk and return if a US investor, UK investor and a Japanese investor invested in the same portfolio is analyzed. For the historical period 2005 the portfolio generated a return of 34.36% and a risk of 7.7%. The empirical work showed that for the international investors the risk was increased with between 1.95% – 410.52% and that the actual return decreased due to weakening currencies against the Krona. In an attempt to predict future exchange rate movements the thesis analyses two financial relationships, PPP and IRP, to calculate equilibrium movements. Both PPP and IRP predicted a depreciation of the Dollar and Pound Sterling against the Krona over the next period, but an appreciation of the Yen against the Krona over the same period. The analytical discussion covers the importance of a well functioning financial system, the institutional effects on exchange rates and the confidence in government policies and their ability to succeed in doing what has been promised.

The thesis examine if the uncovered interest rate parity holds over a 10 year period between Japan and Australia/Norway/USA. The data is collected between February 2001 - December 2010 and is used to, through regression and correlation analysis, explain if the theory holds or not. In the thesis it is also included a simulated portfolio that shows how a carry trading strategy could have been exercised and proof is shown that you can indeed profit as an investor on this kind of trades with low risk. The thesis shows in the end that the theory of uncovered interest rate parity does not hold in the long term and that some opportunities for profits with low risk do exist. / Uppsatsen undersöker om det icke kurssäkrade ränteparitetsvilkoret har hållit på en 10-års period mellan Japan och Australien/Norge/USA. Månadsdata från februari 2001 till december 2010 används för att genom regressionsanalys samt undersökning av korrelationer se om sambandet håller eller inte. I studien finns också en simulerad portfölj som visar hur en carry trading portfölj kan ha sett ut under den undersökta tidsperioden och hur man kan profitera på denna typ av handel med låg risk. Studien visar i slutet att teorin om det kursosäkrade ränteparitetsvilkoret inte håller i det långa loppet och att vissa möjligheter till vinst existerar.

International Fisher Effect (IFE) is a theory in international finance which asserts that the spot exchange rate between countries should move in opposite direction with the interest rate differential between these countries. The aim of this thesis is to analyze whether differences in nominal interest rates between countries and the movement of spot exchange rates between their currencies tend to move together over the long run. The presence of IFE is tested among the G-5 countries and Turkey for the period from 1985:1 to 2007:12. The long run relationship is estimated with the Johansen co-integration method and supportive evidence is found for all country pairs. Individually modeled equations are further tested with the Dynamic SUR method. Those DSUR equations that include the Turkish currency provide supportive evidence for IFE that higher interest rates in favor of Turkey would cause depreciation of the Turkish Lira. The magnitude of the effect is found to be lower than expected which indicates that there might be other factors in economy, such as inflation rates, that affect the exchange rate movements.

<p>Due to globalization investors have increasing opportunities to invest on international markets for diversification purposes. This thesis illustrates the added risks of investing internationally due to volatile exchange rates. The purpose is to analyze how a volatile</p><p>exchange rate affect the risk and return of a portfolio invested in Sweden, when the investor is located in Japan, United Kingdom or the USA.</p><p>To analyze the effect of exchange rate volatility the focus is on a portfolio consisting of Swedish stocks from the Stockholm Stock Exchange (SSE) O-list. First the risk and return to a hypothetical Swedish investor not exposed to exchange rate volatility is calculated.</p><p>Then the effects the exchange rates had on the risk and return if a US investor, UK investor and a Japanese investor invested in the same portfolio is analyzed. For the historical period 2005 the portfolio generated a return of 34.36% and a risk of 7.7%. The empirical work showed that for the international investors the risk was increased</p><p>with between 1.95% – 410.52% and that the actual return decreased due to weakening currencies against the Krona.</p><p>In an attempt to predict future exchange rate movements the thesis analyses two financial relationships, PPP and IRP, to calculate equilibrium movements. Both PPP and IRP predicted a depreciation of the Dollar and Pound Sterling against the Krona over the next</p><p>period, but an appreciation of the Yen against the Krona over the same period.</p><p>The analytical discussion covers the importance of a well functioning financial system, the institutional effects on exchange rates and the confidence in government policies and their ability to succeed in doing what has been promised.</p>

This study analyzes validity of the relative purchasing power parity (PPP) and the uncovered interest rate parity (IRP) theories for the dollar/euro exchange rate. The period of analysis is from 1990 to 2003. The dollar/euro exchange rate represents the currencies of a country, the USA, and a region, the Euro Area. The basic data needed for this study are the dollar/euro exchange rate, and the inflation and the interest rates for the USA and the Euro Area. Since the Euro Area was officially formed on January 1st, 1999, we had difficulty in finding the data for the Euro Area. For the lacking Euro Area data, synthetic values are created by using the individual data of Euro Area countries. These synthetic values are treated as the equivalents of the actual values and are used in the parity implied dollar/euro exchange rate calculations. The parity implied dollar/euro exchange rates are compared with the actual dollar/euro exchange rates. Our results indicate that the parity implied dollar/euro exchange rates are statistically significantly different from the actual dollar/euro exchange rates. In other words, both the PPP and the IRP theories do not hold for the dollar/euro exchange rate.

-Exchange Rate Dynamics under Financial Market FrictionsThis paper extends Dornbusch's overshooting model by proposing "generalized interest parity condition", which assumes sluggish adjustment on the asset market. The exchange rate model under the generalized interest parity condition is able to reproduce the delayed overshooting of nominal exchange rates and the hump-shaped response to monetary shocks of both nominal and real exchange rates.-Electoral Cycle of Exchange Rate in KoreaThis paper empirically investigates the real exchange rate behavior around elections in Korea. We find that the real exchange rate depreciates more before the elections but there is no clear pattern found after the elections. Interestingly, this result is the opposite of the electoral cycle found in Latin American countries. To explain this results we should consider the difference between economic backgrounds of Korea and Latin American countries.-Exchange Rate Regime, Capital Market Openness and Monetary Policy; The Trilemma in KoreaThis paper tests the trilemma proposition by performing an empirical study of Korea. Korea has distinct periods of all combinations of exchange rate regime and capital market openness in trilemma: pegged exchange rate regime under capital controls, pegged exchange rate regime under free capital mobility, and floating exchange rate regime under free capital mobility. We check whether monetary autonomy exists in each of the three different combinations. We find that monetary autonomy existed over the periods with capital controls and the periods with floating exchange rate regime. For the periods with the pegged exchange rate regime and free capital mobility, monetary autonomy was limited. In addition, we identify that just before the financial crisis the government pursued autonomic monetary policy under pegged exchange rate regime and free capital mobility, thereby defying the trilemma.

This thesis concerns with speculative carry trade strategy. Carry trade is based on breach of Uncovered Interest Parity. The theoretical part is focused on traditional fundamental analysis. This thesis deals with the identification of carry trade existence and capture their expressions in the financial markets, verification profitability and attractiveness of carry trade operations, analysis of conditions for carry trade on financial markets before and after global financial crisis 2008. Important part of the work was also description of the consequences of carry trade transactions and their effects on the exchange rate and financial situation

This paper has tested the efficiency, weak form according to EMH, of the currency future market. The efficiency test has been incorporated in the research question since the market has to be efficient in order for the future to work as predictor of the future spot rate - Can currency futures be used as a tool for predicting futures spot exchange rate? The two sub questions are - Is the prediction power of currency futures stable over time and is the prediction power of currency futures similar for different currencies?   The main theory in the research is the Efficient Market Hypothesis and the Random Walk Hypothesis. The research was conducted with a positivistic philosophy in conjunction with a realistic approach. Since the research question has been deducted from the theoretical framework the research has a deductive approach, a quantitative technique was adapted when the data at hand was mainly future and spot rate data.   Data on 13 currencies ranging from 2005 to 2010 was used. The prices were available in weekly intervals for all currencies except for the Brazilian real, Swiss frank and the Mexican peso. The statistical test that was used is the Augmented Dickey-Fuller test and the Phillips-Ouliaris cointegration test. The test was conducted on the whole timeframe. After that, the data was divided into three sub periods to show if the efficiency where different in the period before the crises (2005-2007), during the crises (2008-2009) and after the crises (2010). The test has also been done on annual and quarterly data to show if the length of the time period tested has an effect on efficiency. The PO test has been conducted on all data and the ADF test has been conducted on the whole timeframe and the sub periods.   The results show that, ten of the currencies which we had weakly data, the future is a good predictor of the future spot exchange rate. This is true when the tests are done on an interval of one year and more. For the three currencies that we had monthly data, the results showed cointegration on the whole timeframe. When shorter time periods were tested the currencies that consisted of monthly data showed no cointegration sooner than the weakly data. When test is done on quarterly data, only one test is cointegrated. It cannot concluded that, the future was not a good predictor for the future spot exchange rate during this time, merely that this particular test might be the true one and that the tests where not able to capture it. Several reasons for this are presented in the analysis chapter, where the statistical tests and their design are mentioned among other reasons.