ECS3703 – BL’s Formula Sheet
CAB + FAB + OR’s º 0 º BOP
BOP Deficit: CAB + FAB < 0
OR’s > 0 Losing OR’s: selling more OR’s than buying
Selling their stocks of Forex & Gold
Excess SUPPLY of Dom.Curr in Forex Mkt ® pressure for Dom.Curr to DEPR
BOP Surplus: CAB + FAB > 0
OR’s < 0 Gaining OR’s: buying/importing Hard Currency
Actions by Central Bank
Excess DEMAND of Dom.Curr in Forex Mkt ® pressure for Dom.Curr to APPR
Direct Quotation: ZAR/USD = 7.5000
ZAR 7.5000 : USD 1.0000
Indirect Quotation: USD/ZAR = 0.1333
USD 1.0000 : ZAR 0.1333
Changes in Exchange Rate (ER):
ZAR/USD = 7.5000 à ZAR/USD = 8.5000 == ER (higher price) = DEPR (more ZAR’s to buy $’s)
ZAR/USD = DEPR of ZAR = excess SUPPLY of Domestic Currency
ZAR/USD ¯ = APPR of ZAR = excess SUPPLY of Domestic Currency
X X($) M M(R) Current Dom.
Account Prices
excess SUPPLY ZAR/USD ¯decrease ¯ Increase
of Dom.Curr. = DEPR of ZAR SA’s X’s Cheaper in SA M’s less More Improves Rise
Incr. in Dom Price of more $’s Expensive (dampen
For Curr compet. in ZAR’s imports and
stimulate
exports)
excess DEMAND ZAR/USD ¯ ¯ increase ¯Decrease ¯ ¯
of Dom.Curr. = APPR of ZAR SA’s X’s More SA M’s Cheaper in Worsens Fall
Decline in Dom Price less Expensive more ZAR’s (stimulate
of For Curr compet. in $’s imports and
dampen
exports)
CAB + FAB + OR’s º 0 º BOP
BOP Deficit: CAB + FAB < 0
OR’s > 0 Losing OR’s: selling more OR’s than buying
Selling their stocks of Forex & Gold
Excess SUPPLY of Dom.Curr in Forex Mkt ® pressure for Dom.Curr to DEPR
BOP Surplus: CAB + FAB > 0
OR’s < 0 Gaining OR’s: buying/importing Hard Currency
Actions by Central Bank
Excess DEMAND of Dom.Curr in Forex Mkt ® pressure for Dom.Curr to APPR
Direct Quotation: ZAR/USD = 7.5000
ZAR 7.5000 : USD 1.0000
Indirect Quotation: USD/ZAR = 0.1333
USD 1.0000 : ZAR 0.1333
Changes in Exchange Rate (ER):
ZAR/USD = 7.5000 à ZAR/USD = 8.5000 == ER (higher price) = DEPR (more ZAR’s to buy $’s)
ZAR/USD = DEPR of ZAR = excess SUPPLY of Domestic Currency
ZAR/USD ¯ = APPR of ZAR = excess SUPPLY of Domestic Currency
X X($) M M(R) Current Dom.
Account Prices
excess SUPPLY ZAR/USD ¯decrease ¯ Increase
of Dom.Curr. = DEPR of ZAR SA’s X’s Cheaper in SA M’s less More Improves Rise
Incr. in Dom Price of more $’s Expensive (dampen
For Curr compet. in ZAR’s imports and
stimulate
exports)
excess DEMAND ZAR/USD ¯ ¯ increase ¯Decrease ¯ ¯
of Dom.Curr. = APPR of ZAR SA’s X’s More SA M’s Cheaper in Worsens Fall
Decline in Dom Price less Expensive more ZAR’s (stimulate
of For Curr compet. in $’s imports and
dampen
exports)
