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Monetary policy: A Monetary Expansion Under Floating Exchange Rates: An increase in the money supply shifts the LM* curve to the right, lowering the exchange rate and raising income.. Th
FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS MID – TERM ADVANCED MACROECONOMICS REPORT TOPIC THE JAPANESE YEN'S DEPRECIATION IN 2022 - CAUSES AND IMPACTS Instructor: Le Phuong Thao Quynh Group: Class: KTEE402CLC.2 Member: Pham Thi Kim Anh 2012150011 Ly Duc Dan 2012340005 Nguyen Nguyen Hanh 2012150031 Bui Thi Mai Huong 2012150037 Nguyen Ha My 2012150066 Nguyen An Viet 2012150100 Nguyen Thi Hai Yen 2012150103 Hanoi, June 2022 TOPIC: The Japanese Yen’s Depreciation in 2022: Causes and Impacts Group: – Class: KTEE402CLC.2 No Name Student ID Contribution Phạm Thị Kim Anh 2012150011 Forecasts for the Yen's depreciation Lý Đức Dân 2012340005 Introduction, Lessons for Vietnam and Conclusion Nguyễn Nguyên Hạnh 2012150031 Impacts of the Japanese Yen’s Depreciation in 2022 Theoretical foundations, Overview about Bùi Thị Mai Hương 2012150037 Nguyễn Hà My 2012150066 Theoretical foundations Nguyễn An Việt 2012150100 the Yen’s depreciation in 2022 Causes for the Japanese Yen’s Depreciation in 2022 Nguyễn Thị Hải Yến 2012150103 Impacts of the Japanese Yen’s Depreciation in 2022 TABLE OF CONTENTS INTRODUCTION CHAPTER 1: THEORETICAL FOUNDATIONS Exchange rate 1.1 Definition 1.2 Role of exchange rate 1.3 Mundell - Fleming model 1.4 Theories of Exchange Rate Determination 1.4.1 The mint parity theory 1.4.2 The purchasing power parity theory 10 1.4.3 The balance of payments theory 11 1.4.4 The Monetary Approach to Rate of Exchange 11 1.5 Factors Affecting Exchange Rate 11 1.6 Effects of changes in Exchange rate 13 Interest rate and inflation 14 2.1 Interest rate .14 2.2 Inflation 14 2.3 Relationship between Interest rate and inflation 15 Monetary policy 15 3.1 Expansionary Monetary Policy 15 3.1.1 Definition 15 3.1.2 Tools for an Expansionary Monetary Policy 15 3.1.3 Effects of an Expansionary Monetary Policy 16 3.2 Contractionary Monetary Policy 16 3.2.1 Definition 16 3.2.2 Tools for a Contractionary Monetary Policy 16 3.2.3 Effects of a Contractionary Monetary Policy 17 CHAPTER 2: CAUSES AND IMPACTS OF THE YEN’S DEPRECIATION IN 2022 18 Overview about the Yen’s depreciation in 2022 18 Causes for the Japanese Yen’s Depreciation in 2022 19 2.1 Monetary policy of the Central Banks of Japan and the United States 19 2.1.1 Loose monetary policy of Japan 19 2.1.2 Tightening monetary policies of the USA 21 2.1.3 Conclusion 21 2.2 The increasing amount of JPY sold and USD bought 22 2.2.1 The increasing amount of JPY sold 22 2.2.2 The increasing amount of USD bought 22 Impacts of the Japanese Yen’s Depreciation in 2022 23 3.1 Impacts on Japan’s international trade 23 3.2 Impacts on Japan’s domestic economy 27 3.3 Impacts on Vietnam 29 Forecasts for the Yen's depreciation 30 4.1 Negative forecasts 31 4.2 Positive forecasts 33 Lessons for Vietnam 33 CONCLUSION 35 REFERENCES 36 INTRODUCTION The pandemic of Covid-19 first broke out in Wuhan, China in 2019 and it has left behind thousands of consequences on humanity and especially the global economy All nations in the world have resorted to multiple solutions in order to ward off and minimize both human and economic losses from this disastrous virus In the process of developing vaccines and resuming normal socio-economic activities, many countries implemented policies of social distancing, restriction or even lock-down to cut down on the number of infections and death toll In recent years, many governments have loosened some extreme policies and opened their borders to recover the economy and bring the society back to normal status Although the world economy in general and Japan in particular have shown many signs of recovery after the epicenter of the Covid-19 pandemic, the exchange rate of a number of key global currencies tends to decline in the past few years Recently despite the recovery efforts of the Government, the Yen is no exception "There are positive aspects, but given the current economic climate, the negatives exist strongly," said Finance Minister Shunichi Suzuki, referring to the depreciating yen's impact on Japan's economy “The damage is even greater in the current situation where the cost of crude oil and raw materials is rising globally, while the depreciation of the yen increases import prices, hurting consumers and companies There is no possibility of conversion," added Mr Suzuki The depreciation of the Japanese yen has recently been attracting wide attention For years, as Japan tried to boost its chronically weak economic growth, it pursued what its central bank saw as a magic formula: stronger inflation and a weaker yen The Bank of Japan’s yield-curve control policy is weighing so heavily on the yen that intervening in the market to buy the currency would have little impact Due to the reflected reality and the urgency of solving such an unfavorable situation, the research topic of “THE JAPANESE YEN'S DEPRECIATION IN 2022: CAUSES AND IMPACTS” was chosen The objective of the research is to point out more about the basic status of Japanese’s Yen depreciation The results obtained from the paper should provide a more in-depth understanding of the consequences that affect Japan’s economy itself as well as other countries’ economies CHAPTER 1: THEORETICAL FOUNDATIONS Exchange rate 1.1 Definition - The exchange rate between two countries is the price at which residents of those countries trade with each other - Economists distinguish between two exchange rates: the nominal exchange rate and the real exchange rate The nominal exchange rate is the relative price of the currencies of two countries Example: When people refer to “the exchange rate’’ between two countries, they usually mean the nominal exchange rate For example, if the exchange rate between the U.S dollar and the Japanese yen is 120 yen per dollar, you can exchange one dollar for 120 yen in world markets for foreign currency We can say the exchange rate is 120 yen per dollar, or we can say the exchange rate is 0.00833 (1/120) dollar per yen The real exchange rate is the relative price of the goods of two countries That is, the real exchange rate tells us the rate at which we can trade the goods of one country for the goods of another Formula: Real exchange rate = × Real Nominal Ratio of Exchange = Exchange × Price Rate Rate Level 1.2 Role of exchange rate The exchange rate is an important tool to compare the purchasing power of a domestic currency with a foreign currency From there, it is possible to assess the price of domestic goods with foreign countries, labor productivity in the country with foreign countries, etc The exchange rate affects the import and export activities of the country 1.3 Mundell - Fleming model The Mundell–Fleming model portrays the short-run relationship between an economy's nominal exchange rate, interest rate, and output Document continues below Discover more from: Macroeconomics KTEE402 Trường Đại học Ngoại… 79 documents Go to course ĐỀ THI CUỐI KÌ KINH TẾ VĨ 4 MÔ none Macroeconomics 100% (1) Assignment Macroeconomic : Philli… Macroeconomics 100% (1) Ch3 STU Practice questions Ch3 STU… Macroeconomics 100% (1) Ch05 STU Questions p1 Ch05 STU Questions p1 Macroeconomics 100% (1) Answer problem macro Macroeconomics None IS LM great depression Macroeconomics None - Under a system of floating exchange rates: - Floating exchange rates: the exchange rate is set by market forces and is allowed to fluctuate in response to changing economic conditions Fiscal policy: At any given value of e, a fiscal expansion increases Y, shifting IS* to the right Results: Delta e > 0, Delta Y = In a small open economy with perfect capital mobility, fiscal policy cannot affect real GDP Monetary policy: A Monetary Expansion Under Floating Exchange Rates: An increase in the money supply shifts the LM* curve to the right, lowering the exchange rate and raising income Results: Delta e < 0, Delta Y > Trade policy At any given value of e, a tariff or quota reduces imports, increases NX, and shifts IS* to the right Results: Delta e > 0, Delta Y = Import restrictions cannot reduce a trade deficit Even though NX is unchanged, there is less trade: the trade restriction reduces imports; the exchange rate appreciation reduces exports - Under a system of fixed exchange rates: (Fixed exchange rate: the central bank announces a value for the exchange rate and stands ready to buy and sell the domestic currency to keep the exchange rate at its announced level) Fiscal policy: Under fixed rates, fiscal policy is very effective at changing output Results: Delta e = 0, Delta Y > Monetary policy: Under fixed rates, monetary policy cannot be used to affect output Results: Delta e = 0, Delta Y =