Economics

This section will consider the relationships between spot and forward rates, interest rates, and maturities that exist as a result of arbitrage relationships. Spot and Forward Rates In the professional FX market, forward exchange rates are commonly quoted in terms…

Capital restrictions are the measures that governments or central banks take to control the flow of foreign money in and out of a country’s economy. Objectives of Capital Restrictions Economic Stability and Growth Governments impose capital restrictions to steer their…

An exchange rate regime is the framework a country’s central bank or government employs to determine its currency’s relative value in the international market. This regime influences the country’s trading relationships and capital flows. The chosen regime is based on…

The foreign exchange (FX) market is the world’s largest market, with a daily turnover of approximately USD 6.6 trillion in 2019. It operates 24 hours daily, facilitating international trade and cross-border capital flows with participants from various backgrounds. Functions of…

Cost-push Inflation Aggregate supply is the total amount of goods and services produced by an economy at a given price level. Cost-push inflation is attributed to a reduction in the aggregate supply caused by a rise in the cost of…

It is possible to back out cross rates given two exchange rates involving three currencies. Consider a foreign exchange market with the exchange rate between the Chinese Yuan and the South African rand (ZAR/CNY). This market can also quote the…

A trading bloc is a group of countries that have mutually agreed to reduce and progressively eliminate barriers to trade (for example tariffs) and the movement of factors of production among the members of the bloc and may or may…

Governments may enact policies that limit the free exchange of goods and services between countries. Such policies are known as trade restrictions or trade protections and include tariffs, import quotas, voluntary export restraints (VER), subsidies, embargoes, domestic content requirements, and…

Most economists agree that the advantages of international trade overweigh the disadvantages. Below are the main benefits and costs associated with international trade. Benefits of International Trade Countries gain from exchange and specialization: Countries receive high prices for exports and pay…

Notably, economic expansion, interest rates, and market volatility are all impacted by geopolitical risk in the capital markets. Geopolitical risk can dictate the suitability of a security or investment strategy for an investor’s objectives, level of risk tolerance, and time…