Courses or exchange rate?

The exchange is the process by which bought in a country means of settlement, valid in another country.

The exchange shall be the transaction that is then in contact domestic and foreign operators, within the borders or outside, on the occasion of the completion of international trade, finance and investment.

Currency whose evolution depends on the economic and financial importance of the country are used in international transactions. This value is referred to the concept of exchange rates.

What difference is there between the rate and the exchange rate?
According to established theoretical work on the exchange rate, it is recognized as the conversion rate of one currency to another or as the amount of domestic currency required to purchase one unit of foreign currency.

Economists do not differentiate between exchange rates and the exchange rate. For other economists, the course is a theoretical concept, while the exchange rate is a practical concept.

In addition, the course is the price of the currency and the rate is the change of a price compared to other prices.

The exchange rate can be bilateral (nominal or real), or multilateral real effective.

The nominal exchange rate is the ratio of prices (national / international price p / p *). in: the nominal exchange rate = p / p *.

The real exchange rate (er) is the product of the nominal rate (in) and the price ratio, expressing the purchasing power of currencies of the countries considered, and thus reflects the degree of inflation. st = w * / p.

The multilateral exchange rate is in turn determined by the weighting of the currencies of trade and investment partners, according to coefficients that reflect the importance of financial transactions or real with the country questioned.

The real effective exchange rate is a weighted real exchange rate by market share.

The nominal exchange rate does not allow to estimate the purchasing power of money and its long-term evolution is not an indicator of changes in the competitiveness of an economy, because of the evolution domestic and foreign prices.

For cons, the real exchange rate is a measure of competitiveness.
The good level of nominal exchange rate guarantee long-term external equilibrium, that is to say the balance of trade balance. The nominal exchange rate depends on the inflation differential and the differential output.

Thus, higher prices will encourage the nominal depreciation of the exchange rate.

Three methods are used to determine the exchange rate:

-The method of the IMF model MERM (multilateral exchange rates model) that allows for competition.
-The method of the Brussels commission which is based on the elasticities of trade flows.
The method, which includes both double competition that bilateral trade.