Essays on Risk Appetite, Carry Trade and Exchange Rates by Liu, Margaritis, and Tourani-Rad Article

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The paper “ Risk Appetite, Carry Trade and Exchange Rates by Liu, Margaritis, and Tourani-Rad” is an impressive example of the article on macro & microeconomics. The international  finance discipline seeks to establish how the international financial system in terms of its structure, functions, and operations affects a country’ s economy. In a specific localized context, the study aims at assessing how the international financial system impacts on the Australian economy. Within this context, Liu, Margaritis & Tourani-Rad (2012) sought to establish the nexus between the Yen exchange rate against dominant world currencies such as the Australian dollar and measures of risk appetite.

The ultimate principal focus of this paper is to summarise and appraise the research by Liu, Margaritis & Tourani-Rad (2012) titled ‘ risk appetite, carry trade and exchange rate’ . In regard to the summary, the paper outlines the purpose, research questions, rationale, the literature reviewed, the methodology used, analysis & findings. For analysis, the paper critically assesses and reviews if the article offers insightful paradigms and the adequacy of its coverage in relation to pertinent matters. SummaryDrawing from the exchange rate data from different countries located in different time zones, the purpose of this research is to assess the link between the Yen exchange rate against other four dominant world currencies such as USD/JPY, GBP/JPY, AUD/JPY & NZD/JPY and measures of risk appetite drawn from indices such as S& P500 index, Dow Jones Industrial Average Index & the VIX index and thus they sought to answer three questions.

They sought to establish a relationship (long and short-run relationship) and asymmetric adjustment in the response of exchange rates by testing if there is any major discrepancy in the exchange rate adjustment reliant on whether the most recent equity prices increased or decreased but also whether exchange rates are on top of or beneath their long-term equilibrium association with the market the index.

Bibliography

Liu, M-H., D. Margaritis, and A. Tourani-Rad (2012), ‘Risk appetite, carry trade and exchange rates’, Global Finance Journal, 23, p. 48-63.
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