Gaz de France Essay Example | Topics and Well Written Essays - 1000 words

Gaz de France - Essay Example The interest rate also plays an important role. The prevalent interest of FF against USD will influence FF-USD forward exchange rate. The government budget also plays a role in the exchange market; a deficit in the budget increases foreign currency demand. Among listed parameters; account balance, foreign exchange reserves and government budget are considered as the core parameters. the period from 1980 to the 1st quarter of 1986. Both account balance, and foreign reserves decreased during years from 1980 to 1982. It would depreciate FF against USD, which is also confirmed by the increase in the deficit of the government budget. During the years from 1982 through 1985, an increase in the current account and foreign reserves were observed; however, the budget deficit during the same time kept increasing. This trend would further depreciate the French Franc. Budget deficit considerably decreased in the 1st quarter of 1986 with respect to 1985; this will appreciate the Franc. A combined analysis of trend of account balance, foreign reserve and budget deficit explains that depreciation rate will be substantial during the years from 1980 through 1984, which will slow down in 1985 demonstrating further appreciation of FF in the subsequent year with respect to the previous years. The exchange rate between two currencies is influenced by various parameters. This assignment has selected three parameters; current account, foreign exchange reserves and government budget. The set forth above section presented a forecast of the behavior of the FF-USD exchange rate. The attached graph displays the movement of the real exchange rate for years from 1980 to the 1st quarter of 1986, which confirms the forecasted behavior. The FF depreciated from 1980 to 1982 because all three parameters; budget, balance and reserve show decrease in values from 1980 through 1982. The current balance and reserves showed an in increase from 1982 to 1985, but the budget deficit showed