With reference to appropriate theory AND empirical evidence, write a 1,750-word Essay on ONE


Faculty of Business and Law
 
Assignment Brief Mode C and Q Regulations 
 
 
                                                           
 
 

Assessment Information

 
This assignment is an individual assignment.
 
With reference to appropriate theory AND empirical evidence, write a 1,750-word Essay on ONE of the following topics:
 
1       Critically assess the strengths and weaknesses of Purchasing Power Parity as a theory of exchange- rate determination.
 
2       In September 2022, the Bank of England’s Monetary Policy Committee raised the interest rate to
2.25% with the aim of reducing inflation, the highest level since 2008. Critically evaluate its implication for output and the foreign exchange (FX) market, and how UK’s exchange-rate regime influences the effectiveness of this policy.
 
3       With reference to appropriate theory and empirical evidence, critically discuss the importance of fiscal dominance in explaining why exchange-rate crises occur. 
 
4       Critically evaluate the economic costs and benefits of euro area membership in the context of Optimum Currency Area theory and Maastricht convergence criteria. 
 

Criteria for Assessment

 
        Essay structure (effective introduction and conclusion, use of paragraphs, logical organization).
        Use of economic theory and empirical evidence (clear and accurate analysis, appropriate use of data, accurate interpretation of empirical evidence, good explanation of diagrams and underlying theories, demonstrates clear understanding of key issues).
        Critical evaluation (thoughtful evaluation of arguments and evidence, explains key assumptions and limitations, demonstrates wider knowledge and understanding of relevant literature).
        Presentation and referencing (clear and professional presentation, correct spelling and grammar, follows CU APA referencing guide).
 
This assignment is designed to assess learning outcomes:
Analyse the determination of exchange rates in both the short and long run using appropriate theory and empirical evidence.
 
Examine in detail the macroeconomic implications of alternative exchange-rate regimes and international capital mobility.
 
 

Word Count

The word count is 1750
 
There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more.
The word limit includes quotations and citations, but excludes the references list.
 
 

Answer
Theory and Empirical Evidence: Purchasing Power Parity
            Exchange rate determination makes a strong case for the utility of foreign currencies. Theories of exchange rate determination, in particular, are invaluable when there is need to have a nuanced understanding of the intricacies of constructs such as nominal excha... Txxxxx xxx Exxxxxxxx Exxxxxxx: Pxxxxxxxxx Pxxxx Pxxxxx&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx; Exxxxxxx xxxx xxxxxxxxxxxxx xxxxx x xxxxxx xxxx xxx xxx xxxxxxx xx xxxxxxx xxxxxxxxxx. Txxxxxxx xx xxxxxxxx xxxx xxxxxxxxxxxxx, xx xxxxxxxxxx, xxx xxxxxxxxxx xxxx xxxxx xx xxxx xx xxxx x xxxxxxx xxxxxxxxxxxxx xx xxx xxxxxxxxxxx xx xxxxxxxxxx xxxx xx xxxxxxx xxxxxxxx xxxxx xxx xxxxxxxx xxxxx xxxxxx. Pxxxxxxxxx Pxxxx Pxxxxx xx x xxxxxx xx xxxxxxx xxxxxx xxx xxxxxxxx xxxx xxxxxxxxxxxxx xxxxxx. Ax xxx xxxxxxxxxxxxx xxxxx, xxx PPP xxxxxx xx xxxxxxxx xxxx xxxxxxxxxxxxx xxxxxxxxx xxxxxxxxxx xxxxxxxxx xxxxxxxxxx' xxxxxxxxxx xxxxxx. Ax xxx xxxxxxxx xxxxx, Pxxxxxxxxx Pxxxx Pxxxxx xxxxxxxxxx xxx xxxxxxx xx xxxxxxxxx xxxxx xxxxxxxx xx xxxxxxxxx xx xxxxxxxxx xxxxxxxxx. Ax xxxxxxxxxx xxxxxxxx xx PPP xxxxx xxxxxx xxxx xxxx xxxxxxxx xxxx xxxxxxxxxxxxx xxxxxx xx xxxxxxx xxx xxxxxx xxxxxxxxx xxx xxxxxxxxxx.Sxxxxxxxx xx PPPSxxxxxxxx&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx;&xxxx; Txx xxxxxxx xx xxxxxxxxx xxxxxxxxxxxx xxx xxxxxxx xxxxxxxx xx xxx Pxxxxxxxxx Pxxxx Pxxxxx xxxxxx xx xxxxxxx. PPP xxxxxxxx xxxxx, xxxxxxxxx xx Gxxxxx xxx Mxxxxxxx (2020), xxxxxxxxx xxxxxx xxxxxx xxxx xxxx xxxx xxxxxxxx xxxx xxxxx xxxxxxxx xx xxxxxxxx xxxx xxxxxxxxxxxxx xxxxxxxx. Wxxxx xxxxxxxxx xxxxx xxxxxxxx xxxxx xxxxx xxxxx xxx xxxx xx xxxxxxxxx xx xxx xxxx, PPP xxxxxxx xxxx xxxxxxxx xxxxx xxx xxxxxx xxxxxx. Tx xxxx xxx, xxx xxxxxxxxxx xx xxxxxxxxxx xxxx xxxxxxxxx xxxxxxxxx xxxxxxxxxx xxxxx xx xxx xxxx xxxxxxxxxx xxx xxxxxxxxx xxxxxxx xxxxxx xxx Pxxxxxxxxx Pxxxx Pxxxxx xxxxxxxx. Fxxx x xxxxxxxx xxxxxxxxxxx, xxx xxxx xx xxxxxxxxx xx Pxxxxxxxxx Pxxxx Pxxxxx xxxxx xxxx xx xxxxxxxxxx xx xxx xxx xxxx PPP xxxxxxx x xxxx xxxxxxxx xxxxxxx xx xxxxxxxxx xxxxxxxxx' xxxxxx xxxxxxxxx xx xxxxxxxx xx xxxxx xxxxxxxxxx. Txxx, xxxxxxx Pxxxxxxxxx Pxxxx Pxxxxx, xxxxxxxxxxx xxxxxxxxx xxxxxx xxxxxxxxx xxxxxxxxx...
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