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Corporate and International Finance

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CORPORATE AND INTERNATIONAL FINANCE

30.711

ASSESSMENT TERM 3

METHODOLOGY

The following work has been done using MS Word, MS Excel, R Studio and Oanda. The information on the interest rates of the different countries have been collected from data.oecd.org, and the Balance of payment has been recorded from IMF. Information has also been collected from ProQuest.

The Most Obvious Economic Reason For The Persistent Depreciation Of The Peso

Year

balance on goods (a)

balance on services (b)

balance on goods, and services (c)

balance on goods, services, and primary income (d)

Portfolio investment

Net Error

2008

1.00

1

1.00

1

1

1

2009

0.28

1.28

0.59

0.66

-1.03

0.75

2010

0.17

1.32

0.53

0.58

1.74

4.78

2011

0.07

1.85

0.63

0.81

2.59

2.20

2012

-0.02

1.76

0.54

0.86

3.90

4.11

2013

0.05

1.38

0.46

1.15

2.72

4.19

2014

0.16

1.56

0.60

1.07

2.51

3.68

2015

0.82

1.15

0.93

1.25

1.17

3.48

Fig. 1

The current account consists of all the international economic transactions with income or payment flows occurring within the year.

As seen in fig.1 the balance on services in the current account has been depreciating steadily from the year 2009 until 2015.

The balance on goods and services has been more or less steady according to fig.1.

The balance on goods, services and primary income has depreciated from the year 2013 onwards.

The goods, services and income deal with the exports and imports of the country. The various demand factors that drive the export and import of a country relies on the income, the economic growth rate of the buyer, the purchasing price of any product from the consumer’s point of view after passing through the exchange rate. With a rise in income, there is a rise in the demand for imports. The constant depreciation of the Mexican peso in fig.1 shows that there has been more import than export of goods and services in the country.

Portfolio investment is the capital invested in activities that are solely motivated by profit in the form of returns. As shown in fig.1, there has been remarkable volatility in the portfolio investment from 2010 until 2015. The assets in the portfolio investment has been decreasing during the years 2008 to 2015 while the liabilities have been increasing during the same time period.

[pic 1]

Fig.1.1

[pic 2]

Fig. 1.2

As in fig. 1.2, the box plot chart shows exactly in which months the Mexican peso has depreciated and by how much. The bigger the box, higher the volatility. According to fig. 1.2, the peso has been the most volatile in the month of January and the least volatile in the month of December. It has been more or less stable during the other months.

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