help (1 Viewer)

[user18181818]

i get that the supply of aud will increase as ppl will take their investments out as it is less profitable to do so and sell aud, but how can i determine the impact on the TWI?

 

[mmmmmmmmaaaaaaa]

think about the concept of interest rate differentials + if you said sell aud, which depreciates the currency and the twi is an exchange rate index, won't the twi decrease

so it must be D

 

[indeed]

think about the concept of interest rate differentials + if you said sell aud, which depreciates the currency and the twi is an exchange rate index, won't the twi decrease

so it must be B

Won't it be D, cause the TWI does decrease, but the supply of AUD increases as more sell AUD for other currencies

 

[mmmmmmmmaaaaaaa]

Won't it be D, cause the TWI does decrease, but the supply of AUD increases as more sell AUD for other currencies

yes sorry you are right that’s what I meant .

 

[user18181818]

why would TWI decrease because aren't exports now cheaper?

 

[indeed]

why would TWI decrease because aren't exports now cheaper?

Yh but that's the very indirect effect: increased supply of AUD, depreciation AUD, international competitveness of exports increase, increase TWI

But the more direct effect is: reduced interest rates in AUS vs world, less inward foreign investment, less demand for AUD, depreciation AUD, decrease TWI

 

[user18181818]

Yh but that's the very indirect effect: increased supply of AUD, depreciation AUD, international competitveness of exports increase, increase TWI

But the more direct effect is: reduced interest rates in AUS vs world, less inward foreign investment, less demand for AUD, depreciation AUD, decrease TWI

wait what if the AUD depreciated doesn't that directly mean that exports will rise

 

[indeed]

wait what if the AUD depreciated doesn't that directly mean that exports will rise

Wait I kinda explained that bad. So here are the two cases:

A; reduced interest rates in AUD vs world, less inward foreign investment, increased supply/decreased demand of AUD (as ppl invest in other countries), depreciation AUD/decrease TWI, international competitiveness of exports increase, appreciation AUD/increase TWI

B; reduced interest rates in AUS vs world, less inward foreign investment, increased supply/decreased demand for AUD, depreciation AUD/decrease TWI

Do you see how A (reasoning it based on exports) requires a decrease in TWI then results later in an increase in TWI (as underlined)? Due to the many steps, this takes longer to happen, while B is more direct

 

[user18181818]

Wait I kinda explained that bad. So here are the two cases:

A; reduced interest rates in AUD vs world, less inward foreign investment, increased supply/decreased demand of AUD (as ppl invest in other countries), depreciation AUD/decrease TWI, international competitiveness of exports increase, appreciation AUD/increase TWI

B; reduced interest rates in AUS vs world, less inward foreign investment, increased supply/decreased demand for AUD, depreciation AUD/decrease TWI

Do you see how A (reasoning it based on exports) requires a decrease in TWI then results later in an increase in TWI (as underlined)? Due to the many steps, this takes longer to happen, while B is more direct

okay i think what i'm not understanding is how does depreciation AUD immediately cause a decrease TWI? like what happens when AUD depreciates that causes the TWI to decrease?

 

[indeed]

okay i think what i'm not understanding is how does depreciation AUD immediately cause a decrease TWI? like what happens when AUD depreciates that causes the TWI to decrease?

Oh ok, well the TWI is a measure of the currency's value, so the way you know whether AUD appreciate or depre is if TWI improves or deterioates

 

[indeed]

The AUD value is normally measured via bilateral (AUD/USD), but TWI is another measure as well

 

[user18181818]

Oh ok, well the TWI is a measure of the currency's value, so the way you know whether AUD appreciate or depre is if TWI improves or deterioates

OH i'm so dumb i was getting confused with the TOT
thank u for the help

 

[indeed]

OH i'm so dumb i was getting confused with the TOT
thank u for the help

Np np