Order Description1.has finish literature review. can you help me finish introduction and methodology. thank you.
Effects of the changes in exchange rates between Euro and pound
Introduction
The term exchange rate refers to the rate at which the currency of one country is exchanged for that of another (Frenkel & Johnson 2013). Considering that the global economy is getting ever more integrated (Ghezzi 2013), there is a growing demand for foreign currency all over the world. However, these exchange rates are consistently changing because of factors like inflation, speculation, and interest rates, to mention a few. This paper reviews the literature which explores the effects of the changes in the exchange rates, after building context by examining literature about the different aspects of exchange rate. The contextual information includes the exploration of foreign exchange regimes, types of exchange rates, and the factors which make the rates change.
Literature review
exchange rates
The exchange rates can influence the economic policy of a nation on an extraordinary scale. For instance, currency appreciation can diminish the measure of exports of the nation since they will be costly. Then again, the depreciation of a currency can make the exports of a nation less expensive and that would build their interest (Feenstra 2015). With the expansion in the interest for fares, aggregate supply and GPD would rise and that would lift the employment rate in the nation. Resultantly, there will be some development in the economy as an aftereffect of this deterioration.
Notwithstanding, it is not recommendable for the currency to move to the extremes of the bipolar continuum of the currency changes. In the event the that the money devalues excessively, then it will hurt the economy by making the imports of raw materials excessively costly. Basing on the theory of comparative advantage, each nation needs to import some of its raw materials and services occasionally. In like manner, an excessive amount of depreciation would generate a balance of payments (BOP) deficit because it would inhibit foreign investment. Then again, if a currency appreciates excessively, it could hurt the terms of exchange of the nation. For instance, if the exports of the nation are very expensive, this would prompt little interest in them. Regardless of the fact that the nation would have the capacity to import inputs inexpensively, this may be an eventual burden to the economy since it would instigate overproduction according to Mc Govern 2016.
The ramifications of the exchange rates on the economy have thusly divided the exchange rate regimes of the world. There are exchange rates which move uninhibitedly with the adjustments the market forces, and those which are controlled by monetary authorities, as discussed in detail in the next section.
It is likewise essential to note that currency changes affect the profitability of the multinational companies and other international traders. For instance, KFC has made yearly profits in the France which it has not yet exchanged to dollars. On the chance that at the date of the change from the Euro to the dollar, the Euro appreciates, then KFC will make a currency gain because it will have more dollars for its Euro. The converse is likewise true. In another case, HSBC may have issued credit in dollars to a large multinational. In the period amid which the interest and the principal is being paid, the exchange rates forms will change. In the event that the dollar increased in value, HSBC will make currency losses in because, it will have less pounds than it had initially anticipated that would gain. Then again, say Medtronic procured a German organization for €100 million on 13 May 2016 when the USD/EUR rate was 0.8. On the chance that Medtronic is going to settle the installment on 1 June 2016, and on that day the USD/EUR is 0.6, then Medtronic will lose an additional $17.8 million in the exceeds payments it will make.
Foreign exchange can be traded different ways, which have been categorized according to their times transacting (Johnson 2013). The spot exchange rate is the rate at which the currency is transacted on a particular day, such as is the case in forex bureau. The currency futures alternatively refer to the rate at which different entities agree to exchange currency at a future date. For instance, if an organization is getting a dispatch of inventory in 30 days and needs to insure against currency instability, it can utilize futures to accomplish this. It would go to a forex seller and arrange a rate at which to purchase the required currency on that date later on. Lastly, a currency forward is the rate which two or more entities consent to transact with on a given date later on. For instance, if a foreign organization needed to purchase stock from a UK organization on a future date, the two could concede to a given rate at which to exchange their items without minding what the exchange rates really are.
To maintain a strategic distance from such episodes as currency volatility from inflicting on them, a few people and organizations take an interest in currency hedging. They buffer against the danger of losing money to currency unpredictability. To that end, the most used instrument is the forward contract. In the forward contract, the parties who will be engaging in the exchange concur that one is going to purchase whatever it is they are purchasing, from the vender at a given exchange rate regardless of the actual prevailing rate. For instance, if Medtronic was acquiring an organization and concluded that it was paying the cash on a given date and the exchange rates are different on that date, then Medtronic would still pay the rate on which it concurred.
Types of exchange rate regimes
The foreign exchange world is characterized by various types of foreign exchange regimes, which are elaborated as follows:
A floating exchange rate regime is the one where a country lets the market forces influence its currency, with hardly any interference from the authorities (Ghosh 2015). The United Kingdom falls under this category, according to an article by the IMF (De Facto Classification of Exchange Rate Regimes and Monetary Policy Framework 2006).
The other exchange rate regime is that of exchange rate arrangements with no separate legal tender. With this kind of regime, the currency of a foreign country is the only legal tender. Alternatively, this kind of regime requires that the nations which are using it are under regional integration such as is the case in the EU. Consequently, all of the Euro countries fall under this category. Conceivably, the IMF points out that this signifies the total surrender of the power to control the currency by the monetary authority (De Facto Classification of Exchange Rate Regimes and Monetary Policy Framework 2006). Moreover, this surrender of authority then puts the country in the precarious position where its economy is partially at the mercy of the external economic policy makers. Arguably, this can be a positive move because it creates economies of scale in managing the currency.
The pegged currency regime is the one where the currency of a country is pegged either formally or informally to the currencies of other countries. According to the IMF, the currencies against which the currency is pegged are usually those of the trading partners (De Facto Classification of Exchange Rate Regimes and Monetary Policy Framework 2006). However, the pegging indicated the distribution of trade within the trading region or circle. In other words, those with high volumes of trade naturally have higher value currencies. Noteworthy, the peg is designed in such a way that the currency of the pegging country is not allowed to exceed or go under a particular threshold in relation to the other currencies.
Notably, there are other underlying specifications within the aforementioned types of exchange rates, but these are the major exchange rates.
Monetary policy
Considering that one of the effects of changes in exchange rates is a change in the monetary policy of countries, it is valid to include this section in the literature review. Bruno & Shin (2015) postulate that the exchange rates usually dictate economic policy in general and monetary policy in particular. However, the reverse is also true. For example, a country which is seeking to reduce its inflation through a contractionary monetary policy can hike its interest rates, and this hike in the interest rates will increase foreign investment in the economy. This in turn will make the currency appreciate. Alternatively, the changes in the currency can affect the monetary policy of the country as well. For example, a depreciating currency may increase the demand for the exports of the country. This may increase the amount of money in the economy and possibly cause unsustainable inflation. Consequently, the central bank is likely to impose contractionary monetary policies in response. Discussed below are the most common monetary mechanisms for influencing or responding to interest rate changes.
exchange rate anchor is the framework where the monetary authority is consistently kept ready to buy or sell foreign currencies with the aim of keeping their own currencies at a predetermined level. This mechanism is applied to all of the exchange rate regimes with the exception of the free float currency regime.
Inflation targeting framework is the one where the monetary authority bases its currency activities on the differences between the target and the actual inflation. Considering the power which inflation has over the economy, this mechanism is rather effective (De Facto Classification of Exchange Rate Regimes and Monetary Policy Framework 2006).
Noteworthy, the monetary control mechanisms are not limited to these two frameworks, but the others are customized across countries. A fuller presentation of these mechanisms is indicated in table 1 below.
Table 1: Currency regimes according to country and monetary policy
Exchange Rate Regime
(Number of countries) Monetary Policy Framework
exchange rate anchor Monetary aggregate target Inflation targeting framework IMF-supported or other monetary program Other
Exchange arrangements with no separate legal tender (41) Another currency as legal tender (9) ECCU (6)3 CFA franc zone (14) Euro area (12)
Austria
Belgium
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
WAEMU CAEMC
Ecuador
El Salvador
Kiribati
Marshall Islands
Micronesia, Fed. States of
Palau
Panama
San Marino
Timor-Leste, Dem. Rep. of Antigua and Barbuda
Dominica*
Grenada*
St. Kitts and Nevis
St. Lucia
St. Vincent and the Grenadines Benin*
Burkina Faso*
Côte d’Ivoire
Guinea-Bissau
Mali*
Niger*
Senegal
Togo Cameroon*
Central African Rep.
Chad*
Congo, Rep. of*
Equatorial Guinea
Gabon
Currency board arrangements (7) Bosnia and Herzegovina
Brunei Darussalam
Bulgaria*
Hong Kong SAR
Djibouti
Estonia
Lithuania
Other conventional fixed peg arrangements (52) Against a single currency (47) China
Guyana*7, 8
Sierra Leone*7
Suriname, 8, 9 Pakistan
Aruba
Bahamas, The
Bahrain, Kingdom of
Barbados
Belarus
Belize
Bhutan
Bolivia, 10
Cape Verde
China
Comoros 11
Egypt
Eritrea
Ethiopia
Guyana*7, 8
Honduras*†7
Iraq*7
Jordan
Kuwait
Latvia
Lebanon
Lesotho
Macedonia, FYR*7
Maldives Malta
Mauritania
Namibia
Nepal*
Netherlands Antilles
Oman
Pakistan
Qatar
Rwanda*
Saudi Arabia
Seychelles
Sierra Leone*7
Solomon Islands
Suriname, 9
Swaziland
Syrian Arab Sep.
Trinidad and Tobago
Turkmenistan
Ukraine
United Arab Emirates
Venezuela, Rep. Bolivarian de
Vietnam
Zimbabwe
Against a composite (5)
Fiji
Libyan Arab Jamahiriya
Morocco Samoa
Vanuatu
Pegged exchange rates within horizontal
bands (6)12 Within a cooperative arrangement (4)
Cyprus
Denmark
Slovak Rep.
Slovenia Other band arrangements (2)
Hungary
Tonga Hungary
Slovak Rep.
Crawling pegs (5) Azerbaijan
Botswana
Costa Rica
Iran, I.R. of, 13
Nicaragua Iran, I.R. of, 13
Managed floating with no pre-determined path for the exchange rate (51) Argentina
Bangladesh*
Cambodia
Gambia, The
Ghana*7
Haiti
Jamaica
Lao P.D.R.9
Madagascar*7
Malawi*
Mauritius
Moldova*
Mongolia
Sri Lankan
Sudan
Tajikistan
Tunisia
Uruguay*
Yemen, Rep. of
Zambia* Colombia*
Czech Rep.
Guatemala
Peru*
Romania
Serbia, Rep. of
Thailand Afghanistan, I.R. of*
Armenia*7
Georgia*
Kenya*
Kyrgyz Rep.*
Mozambique*7 Algeria
Angola
Burundi*
Croatia*
Dominican Rep.*
Guinea
India
Kazakhstan
Liberia
Malaysia
Myanmar
Nigeria
Papua New Guinea
Paraguay*
Russian Federation
São Tomé and Príncipe*
Singapore
Uzbekistan
Independently floating (25) Albania*
Congo, Dem. Rep. of
Indonesia
Uganda Australia
Brazil
Canada
Chile
Iceland
Israel
Korea
Mexico
New Zealand
Norway
Philippines
Poland
South Africa
Sweden
Turkey*
United Kingdom Tanzania*7 Japan
Somalia, 15
Switzerland
United States
Source: IMF.org (For details https://www.imf.org/external/np/mfd/er/2006/eng/0706.htm)
Interest rate
The interest rates influence the trades rates through different components. If for instance the central bank expands the interest rates, the currency of the nation will appreciate. When the interest rate heightens, it gets more profitable to invest in the economy in light of the fact that the investors will get more returns for their money. Resultantly, when the interest rates are raised, then more individuals will purchase the currency of a given nation with the aim of saving their money there. For instance, if the interest rates in the UK increased by 2%, the investors would hope to procure 2% more than they were getting on their pound investments. This would drive them to purchase for more pounds, and this trend would drive the cost of the pound higher, as represented in figure 1. Then again, if the interest rates decrease, then individuals have less on a motivation to save. This may either stagnate the interest for the currency of a nation or depreciate it, on the chance that the various components are held constant (Gail 2015).
Figure 1: Changes in the demand of the pound after an interest rate raise
This affirms Acerola et al.’s (2014) proposition that the ascent in interest rates drives the value into a nation’s currency. However, this is only true for countries with floating currencies.
On the other hand, the interest rates can influence the exchange rates of a nation by impacting the quantity of investment. In the event that the interest rates are high, the general population in the economy have an impetus to save a greater amount of their cash. This gives the banking institutions more money to lend. When the businesses and individuals have access to the necessary funds, they can expand their business and eventually, the domestic business sector will become saturated. At such capacity, the local investors will expand into universal markets and they will exchange their local currency for foreign currency. Be that as it may, this doesn’t devalue their local money as a result of the possible repatriation of their income, which is assimilated into their local economy. This consequently makes their currency.
Similarly, an increase in the interest rates over the long and medium term builds up the culture of saving. This is on the grounds that the opportunity cost of consuming the money becomes much higher because of the increased interest rate. Resultantly, individuals start to save more of their cash, and this causes a decline in aggregate demand. This has two types of impacts. The primary impact is an immediate one in that the lack of the money in the economy will prompt its demand surpassing its supply. This will then cause the currency to appreciate. Then again, the low aggregate demand may prompt a decrease in the amount of imports. In the event that the nation being referred to keeps up a vast terms of trade deficits, the decrease in the value of imports can prompt currency depreciation. This deterioration would be a consequence of the decrease in the demand of the currency of the economy as a result of the decrease in imports. Be that as it may, both the UK and the USA have reliably had incremental import values over the time of this examination (10 years) as demonstrated in figure 2.
Sources: Census.gov and ons.gov.uk
This demonstrates the adjustments in the interest rates have not been sufficiently considerable to influence the rates of importation in the nation (notwithstanding when they declined). It is likewise imperative to note, that this deterioration would only happen if the value of the imports which are being hindered by a decrease in the aggregate demand surpasses the value of the foreign savings which drive up the interest of the currency being referred to. At the end of the day, the impact of the interest rates on the exchange rates is a symbiotic relationship which is affected by different elements.
Inflation
In the event that the inflation in a given nation is generally lower than that of different nations, then the products of that nation will be less expensive. This attracts customers to the products of such a nation. Thusly, the demand for the currency of the nation being referred to will rise and that will bring about currency appreciation. On the other hand, if the inflation in a given nation is higher than that in different nations, then the money of the currency being referred to might depreciate. This depreciation would be an aftereffect of the decrease in the demand for the currency of the nation being referred to in view of the decrease in the demand for its exports. In any case, there are different elements which must be considered with this hypothesis. For instance, the nation being referred to might have comparative advantage. Alternatively, the nation being referred to might have trade agreements with its key trade partners, in the opinion of Case et al. (2012).
The inflation rate can likewise impact the exchange rates by affecting the interest rates of an economy. Ordinarily, when the inflation rate rises past the target of the central bank, then the same bank tries to bring that inflation down by increasing the interest rates. The increment in these interest rates then decreases the measure of spending in the economy as a result of the high opportunity cost of spending rather than saving (Mania 2014). This amount of saving would give the financial institutions more to loan to forthcoming investors. Be that as it may, considering that the interest rates will be higher, the rate of borrowing would be lower as per Mania (2014). The summative finish of this situation is that the demand for the currency will rise in view of its shortage. This demand along these lines makes the currency appreciate.
The above two propositions depend on the presence of controllable inflation and stable economic development. In any case, if the inflation is extreme to the degree that was faced in Zimbabwe, then it will undoubtedly pulverize the currency of the nation. High inflation can radically depreciate the currency of a nation (Wray 2015). Subsequently, the value of exports of the nation likewise decrease radically, in light of the fact that purchasing the currency of the export destinations is very costly. In such a situation, even the local markets would crumple on the grounds that the expense of things would be very costly for the subjects, making it impossible to manage. This would restrain the productivity of the imports and subsequently, decrease the demand for the money of the nation even more.
The effect of inflation on the interest rates is also dependent upon the level of central bank or government indolent in the foreign exchange of a nation (Burnside et al. 2016). In the event that the exchange rate is left to float uninhibitedly, then the proposition that inflation influences it is a certainty. This is on account that the currency costs are left to change with the forces. Both the US and the UK have unreservedly monetary standards without the immediate mediation of their national banks so the past contention applies to them both. Be that as it may, in the economies where the exchange rate is controlled by the authorities, it is possible for them to overlook the inflation and fix the interest rates however they see fit.
For the whole discussion, the effect of the inflation on the exchange rates has incredibly been founded on the inner point of view. In any case, there is a great deal of academic proof indicating the way that the economic environment in one nation influences the economic environment in other nations (Steers & Narvon 2014). In addition, this situation has significantly been exacerbated by the ascent in the degree and extent of globalization. Thus, the inflation rates in the nations which are the trading partners of the USA and the UK likewise influences the exchange rates of these nations. For instance, China is the main export partner of the US (Trade in goods with China 2016). In any case, the fast economic development in China has demonstrated unsustainability, something which is debilitating the economic stability of the US. As the excess production destabilizes China’s economic growth, the US organizations which had made it a pattern to offshore their production there are in hazard. The incremental demand for Chinese labor may inflate it, and this would increase production costs. On the chance that this happens, then the US organizations would have lower benefits to repatriate to the US. Considering that these organizations are making generous segments of their income in China, a decrease in the measure of repatriated funds would reduce the demand for the dollar. From an alternate point of view on the issue, these offshoring organizations for the most part export their items from China back to the US, with the most popular one being Apple. In the event that the expenses of reducing in China rise, their items will turn out to be costlier and as the law of demand predicts, this will reduce the interest for their imports. On the off chance that this happens, then the diminishment in the volume of the imports will decrease the demand for the dollar and this may prompt the deterioration of the dollar.
Balance of payments
The balance of payments influences the exchange rates in an assortment of ways. In the first place, the parity of exchange decides how much the currency of an economy is requested for. The predominance of the US in universal exchange can be set as one reason why the dollar has stayed a standout amongst the currencies on the planet. In any case, in the event that you take a look at the recorded export figures of the US in figure 3 underneath, it demonstrates that the relationship between the dollar index and exports is erratic. The dollar is a universally used currency, and this is prone to contort the genuine relationship between US balance of payments and the adjustments in the value the currency. Other than that, the way that it is generally reserved in substantial amounts by nations like China also justifies the irregularity.
The financial section of the BOP also influences the exchange rate of a nation. The pattern of foreign investment in securities is on the ascent both in the UK and in the US. This is because of the extension of developing business sector multinationals like Lenovo and LG. Be that as it may, to purchase these securities, the investors need to utilize the currency section of the nation in which they are purchasing the securities, and this builds the demand for the currency of the host nation. The financial account likewise checks the foreign reserves, as specified earlier. In the event that a nation purchases such an extensive amount another nation’s currency for foreign reserves, then the currency of the other nation is prone to rise as a result of the expansion in its demand. Truth be told, a few nations have been blamed for utilizing this fundamental of the parity of installment to impact the cash developments of different nations. For instance, it was alleged that China was accumulating US dollars in its foreign reserves just to increase the value of the dollar (Arizonan 2015). As it were, if a nation means to drive the value of one currency up, it can raise its outside stores for that money. At the point when that happens, the shortage of the currency and the expansion in its demand naturally drive up its cost. Be that as it may, a nation may do this with a specific end goal to make increase the cost of the exports of its rivals in the worldwide business sector. In doing as such, the products of the nation with the lower value money would be favored over those of the other.
Speculation
Frenkel & Johnson, (2013) concede that the changes in the exchange rates are not always a representation of economic fundamentals. Sometimes, the changes in the currencies reflect the sentiments or thoughts of the currency traders. If they believe that a future occurrence shall change the value of the currency, they structure their demand and supply accordingly. For example, after the Brexit vote, the British pound depreciated against the dollar the very next day (Soffen 2016). This is because institutions had stopped buying pound sterling on a large scale because of the trade restrictions which the UK had invited upon itself when it voted for the exit out of the EU.
Alternatively, speculation can lead to the hoarding of a given currency because of the belief that its value will rise in future. When this happens, then the demand for the currency in question rises and consequently, the value of the currency.
Government financial stability
Government securities are the threshold of risk free trading. In other words, governments are not expected to default on their debt (Damodaran 2016). However, in the rare case that the government appears like it might default on its debt, then the holders of this debt are likely to get into a rush to sell it. If that happens, then the supply of the currency in question is likely to depreciate it.
Positioning of the other currencies
The changes in the strength of other currencies countries is also an influence. If the currencies of other countries are becoming relatively unstable, then the investors and other entities are likely to purchase other currencies over the one which are more stable. At the beginning of the Eurozone crisis for example, the Euro was very unstable and the US was also going through another financial crisis around the end of 2011 and the beginning of 2012. Because of this, there are some other global currencies which gained momentum. These currencies include the Swiss Franc and the Japanese yen (Frenkel & Johnson 2013).
Direct intervention by the government
Some governments artificially engineer their exchange rates in order to achieve a predetermined result. Besides using the conventional mechanisms of currency control, such as currency regimes, some countries use unorthodox measures. For example, China was alleged to have interfered with the currency values of both the yuan and the dollar. The country achieved this by hoarding dollars in its reserves with the aim of devaluing the yuan and making the dollar appreciate.
Economic cycles
The economic cycles of recession and economic growth also have the capacity to influence changes in the foreign currency (Frenkel & Johnson 2013). When there is economic growth in the country, it attracts more investment because of the growing disposable income. This new investment increases the demand for the currency of the country and therefore, causes its currency to appreciate. On the other hand, if the economy of a country is undergoing a recession, it will attract less investment. Consequently, the demand for its currency will decline, and this will depreciate the aforementioned currency.
Effects of the changes in the exchange rates of the Euro and the pound
The changes in the currency of a country can restructure the gross domestic product of a country, according to Magud et al. (2014). Considering that a portion of the GDP deals with the terms of trade (X-M), then the changes in the exchange rate is bound to change the GDP. The volume of exports of a country is highly contingent on the strength of that country’s currency relative to other currencies. If the currency of the given country is too strong, then it is highly likely that the exports of the same country will be lower than those of the other countries where the currency is relatively cheap.
The changes in the interest rate also affect the securities of a country. When the currency appreciates, the securities become more expensive. Moreover, according to financial valuation, these securities may be overvalued because of the currency differences. Resultantly, the foreign investors might refuse to pay for the stocks because they would understand that they are inflated by currency appreciation. Moreover, it would highly be likely that these stocks would possibly decline in the near future because of the increase in the price of exports (most public companies are multinational). On the other hand, after depreciation of a currency, the stock market is likely to strengthen in the short run because the cost of the stock would be lower and an increase in foreign investment would be speculated. However, Frenkel & Johnson (2013) highlight the importance of studying the cause of the currency movements, as it would be one of the leading pointers about how the stock market will react. For example, after the UK voted to exit the European Union, the pound dropped along with the drop in the FTSE, which is one of the leading stock index (Wearden & Fletcher 2016).
The changes in the exchange rate can also affect the levels of foreign direct investment flowing in and out of the economy. When the currency appreciates, foreign companies which would like to invest in the economy must spend more of their currency to invest in the country in question. For example, if Chevron was conducting a feasibility study about investing in the EU at a rate of 0.5 USD/EUR. Then a few weeks later, the Euro appreciates to 0.4, then Chevron would have to increase the dollar value of its investments despite the fact that the returns in Euros would remain the same.
Foreign exchange changes can also affect the inflation rates of a country. If the exchange rate increases for a particular currency, then the cost of the imports declines. Moreover, this decline in the cost of imports can drastically influence the balance of trade, because people are likely to increase their consumption of the said imports.
Conclusion
In this period of intense globalization and a linked global economy, the market of foreign exchange is the busiest market in the world. Moreover, the foreign exchange movements at the national level are influenced by currency regimes like floating currency regime and the pegged currency regime. From these domestic regimes, the currencies interact with other currencies in the global market to influence regional and global economics, as discussed throughout the paper.
These exchange rates of a given nation play a vital role in the macro economic environment of a country. These exchange rates affect a variety of economic components from inflation to the gross domestic product of a country. However, it is impossible to understand exchange rates effects without first analyzing the factors which cause these changes in the exchange rates.
As illustrated in the above discussion, scholars put a lot of emphasis on three main influences of the exchange rate changes, including inflation, interest rates, and the balance of payments. Noteworthy though, the research about the topic is greatly generalized across nations and there is no specific literature which confines its study on the Euro or the pound. However, the findings section of this dissertation intends to answer this this question by using primary data.
References
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Burnside, C, Eichenbaum, M, & Rebelo, S 2016 Currency crises models in banking crises, Basingstoke, Palgrave Macmillan UK.
Case, KE, Fair, RC, & Oster, SM 2012, Principles of economics, Upper Saddle River, Prentice Hall.
Damodaran, A 2016, Damodaran on valuation: security analysis for investment and corporate finance, Hoboken, NJ, John Wiley & Sons.
Frenkel, JA, & Johnson, HG 2013, The Economics of Exchange Rates (Collected Works of Harry Johnson): Selected Studies, London, Routledge.
Galí, J 2015, Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications, Princeton, Princeton University Press.
Johnson, HG 2013, International Trade and Economic Growth (Collected Works of Harry Johnson): Studies in Pure Theory, London, Routledge.
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Wray, LR 2015, Modern money theory: A primer on macroeconomics for sovereign monetary systems, Berlin, Springer.
Journals
Aizenman, J 2015, Internationalization of the RMB, Capital Market Openness and Financial Reforms in China, Pacific Economic Review, Vol. 20, No. 3, pp. 444-460.
Bruno, V, & Shin, HS 2015, Capital flows and the risk-taking channel of monetary policy, Journal of Monetary Economics, Vol. 71, No. 1, pp. 119-132.
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Feenstra, RC 2015, Advanced international trade: theory and evidence, Princeton, Princeton university press.
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Soffen, K 2016, The stunning collapse of the British pound, in charts, Washington Post, Retrieved on 9 August 10, 2016 from https://www.washingtonpost.com/news/wonk/wp/2016/06/24/the-british-pound-has-suffered-a-stunning-collapse/
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Wearden, G & Fletcher, N 2016, Pound and shares rally after two days of record Brexit losses – as it happened, The Guardian, Retrieved on 9 August 2016 from https://www.theguardian.com/business/live/2016/jun/28/brexit-3-trillion-stock-markets-sterling-ftse-business-live
HERE IS A PIECE OF MY OPINION, IF YOU DON’T MIND.
NOTE: The literature review is supposed to look at existing literature, and it is all generic, constructed around economic concepts. The quantifiable effect of these changes on SPECIFICALLY the Euro and the pound are supposed to be in the FINDINGS section of the research – what you discovered in your own research, not in reviewed literature.
One more thing, the Brexit was a month and some weeks ago. Economic data is based on a quarterly and annual basis. E.g. The GDP is quarterly and annual. Same goes for inflation. So, basing the literature review on before and after Brexit is not practical but I have integrated as many as pre and after data as I could find available.
Also, the literature review is really long in 5000 words (18 pages) when most standard dissertations are around 30 pages. This leaves 12 pages for the introduction, the research questions, hypotheses, objectives, the findings, the discussion, the limitations, research gaps, and implications for further research. The great word count also creates a lot of space for irrelevant wording and concepts to fill up the word count.
