经济学Essay写作：How are Businesses Affected by the Exchange Rate System
本文是经济学专业的Essay范例，题目是“How are Businesses Affected by the Exchange Rate System（汇率制度对企业有何影响）”，“我们声明，这项任务完全是我们自己的工作，并已适当确认在准备工作中使用的任何信息来源。”
“We declare that this assignment is our own work entirely and suitable acknowledgement has been made for any sources of information used in preparing it.”
The effect of a rise in the exchange rate on the supply of foreign exchange is ambiguous. Explain.
First of all, as we know that supply of foreign exchange is foreign currencies flow into the domestic economy which happens when foreigners import or buy goods and services from our country. For example, when the US dollars are valued high, foreign goods and services are cheaper to U.S buyer, so U.S consumer can buy more foreign goods and services and people will supply more dollars at a higher exchange rate.
Since a higher exchange rate means that a dollar can be traded for more other countries currency. Thus we can say that there is a positive relationship between the value of USD in terms of ringgit and the quantity of USD being supplied. The higher the value of USD in terms of ringgit, the more USD will be supplied. So, we can expect that the supply curve (s) for dollars to be upward sloping, as suggested in graph below. ( The bond and foreign exchange markets )
因为较高的汇率意味着一美元可以与更多国家的货币交易。因此，我们可以说，以林吉特计算的美元价值与美元供应量之间存在着正相关关系。美元对林吉特的价值越高，提供的美元就越多。因此，我们可以预期美元的供给曲线是向上倾斜的，如下图所示。(债券及外汇市场)
The reason why we say that the effect of a rise in the exchange rate on the supply of foreign exchange is not clear is because demand and supply of foreign exchange will influences the determination of exchange rate, but the changes of the supply of foreign exchange are depending on the demand and not on the exchange rate. Even thought there are positive relationship between exchange rate and supply of foreign exchange rate. Thus, we can know that the changes in exchange rate might affect the supply of foreign exchange, but determinant of the changes of supply foreign exchange is not exchange rate.
Besides that, there are several factors that affect the changes in exchange rate and supply of foreign exchange. Firstly, the supply and demand of foreign exchange is depends on a lot of factors, such as Economic factors, Political factors and so on. Economic factors are include economic policies that formulated by central banks and government agencies, economic reports, conditions and others. For example, central banks include the Federal Reserve Bank of United States or the European Central Bank. Nowadays, banks are not only the participants within the foreign exchange market. There has been an increase in many non bank participants, such as individuals since the rise of high technology and the increasing accessibility of the market activity to ease. ( CMSFOREX )
除此之外，还有几个因素影响着汇率和外汇供给的变化。首先，外汇的供求取决于很多因素，比如经济因素，政治因素等等。经济因素包括中央银行和政府机构制定的经济政策、经济报告、经济状况等。例如，中央银行包括美国联邦储备银行或欧洲中央银行。如今，银行不仅仅是外汇市场的参与者。随着高科技的兴起和市场活动的日益便利，许多非银行参与者(如个人)有所增加。(CMSFOREX)
Furthermore, political conditions within and around the country also affect the currency market. Regional, central and international politics influence the currency market as well. Besides that, market psychology and the perception of the traders and buyers also affect the currency market in various ways. (Stanley St Labs) It is because the supply elasticity of foreign exchange refers to the responsiveness of sellers to movements in the rates. Thus when the sellers are highly responsive to those changes, the supply can be said is elastic.
Moreover, for the industry that involved with indirect cost ( land- intensive), its supply prices tend to rise when demand increases and to fall as demand decreases. But for the decreasing cost industries ( capital intensive ) the supply price will tend to decrease when the quantity demanded increase. It is because a decreasing cost industry occurs due to the entry of new firms, prompted by the increased demand, so that each form turned to long-term decline, thereby reducing the minimum efficient scale of production.
After we know the factors that determine the demand and supply of foreign exchange, we have to know the factors affecting foreign exchange rates as well, since they are related. There are 6 determinants of exchange rates which is inflation, interest rates, current account deficits, public debt, terms of trade, political stability and economic performance.
在我们知道了决定外汇供求的因素之后，我们还必须知道影响外汇汇率的因素，因为它们是相互关联的。汇率有6个决定因素，即通货膨胀、利率、经常账户赤字、公共债务、贸易条件、政治稳定和经济表现。
As we know that changes in relative inflation rate in a country can affect international trade activities in that country, such a change influences the demand and supply of foreign and home currencies and affect the foreign exchange rate also. Besides that, a country with a consistently higher inflation rate exhibits a depreciating currency value, as its purchasing power decrease relative to other currencies, thus this situation prompts people to buy foreign goods instead of buying domestic goods since it is much expensive than the goods from other countries. For example, Malaysia inflation rate increases suddenly, this would cause an increases in the Malaysia’s demand for foreign goods and then also cause an increase in the Malaysia’ demand for foreign currency. Thus there is negative relationship between inflation rate and exchange rate.
As a general rule, all investors would like to invest in country which interest rate is more attractive. It is because higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise; it is because if Malaysia’s interest rates are more attractive relative to US rates, US residents with excess cash would like to invest in Malaysia in order to get higher interest. In other words, more US dollars are converted to ringgit, results in an increase in supply of US dollars and ringgit will be appreciated.
一般来说，所有的投资者都愿意在利率更有吸引力的国家投资。这是因为在一个经济体中，较高的利率为贷款人提供了相对于其他国家更高的回报。因此，较高的利率吸引外资，导致汇率上升;这是因为如果马来西亚的利率相对于美国利率更具吸引力，那么拥有过多现金的美国居民就会想要在马来西亚投资，以获得更高的利率。换句话说，更多的美元被兑换成林吉特，导致美元供应增加，林吉特就会升值。
Besides that, a deficit in the current account shows the country is spending more on foreign trade than it is earning which mean import more than export, and it suppliers more of its own currency than foreigners demand for its products. Thus, we can know that the excess demand for foreign currency will lowers the country’s exchange rate until domestic goods and services are cheap enough for foreigners. Furthermore, public debt also will affect the exchange rate, since a large debt will encourage inflation and cause the inflation and then influence the exchange rate that discussed as above. ( Jason Van Bergen )
Since the terms of trade are related to current account and the balance of payments, thus it will affect the exchange rate also. Lastly, a country with positive attributes will draw investment funds away from other countries have more political and economic risk potentially.
由于贸易条件与经常项目和国际收支有关，因此它也会影响汇率。最后，一个具有积极属性的国家会从其他国家吸引投资资金，潜在的政治和经济风险更大。
As a conclusion, we can know that interest rates, inflation and exchange rates are highly correlated and the effect of a rise in exchange rate on the supply of foreign exchange is not clear since the supply of foreign exchange will not affected by the exchange rate even though there is positive relationship between them. Besides that, the changes in both are depending on several determinants.
During the 21st century, one of the keyword in the business field is globalization which business owners in the globalized economies are multinational corporations (MNCs) which can be approximated on the flows and amount of Foreign Direct Investment (FDI). FDI is a business relationship of a parent company and its foreign subsidiary which is a form of business that function outside of the domestic territory of the investors. In other word, FDI could be defined in an easier way as a company from one country making a physically investment at the other country by building a factory, outlet or stores at foreign country. In Malaysia, for non-resident investor, FDI is set up with the holding of at least 10% of the total equity in a resident company. Yet, Malaysia is one of the most successful examples of attracting high FDI in Southeast Asia by increasing country’s and company’s cash inflow. Malaysia government are updating the new strategies in order to attract more FDI to Malaysia and encouraging economy to foreign investors. (Trade Chakra, 2008). Apart from that, FDI is generally is economic development which would lead to job creation, therefore develop country are encouraging FDI to decrease unemployment rate.
在21世纪，商业领域的关键词之一是全球化，全球化经济中的企业主是跨国公司(MNCs)，可以用外国直接投资(FDI)的流量和金额来近似。外国直接投资是母公司及其外国子公司的一种商业关系，是一种在投资者的国内领土之外运作的商业形式。换句话说，外国直接投资可以更简单地定义为一个国家的公司在另一个国家进行实际投资，在外国建立工厂，outlet或商店。在马来西亚，对于非居民投资者，外国直接投资是建立在持有至少10%的总股本在当地公司。然而，通过增加国家和企业的现金流入，马来西亚是东南亚吸引大量外国直接投资的最成功的例子之一。马来西亚政府正在更新新的战略，以吸引更多的外国直接投资到马来西亚，并鼓励外国投资者的经济。(贸易脉轮,2008)。除此之外，外国直接投资通常是经济发展，这将导致创造就业，因此发展中国家鼓励外国直接投资来降低失业率。
MNCs are potentially subject to taxation in both parent and host countries; however most of the parent country could reduce or get rid of the thread of double taxation on their MNCs. In recent year, due to the increase number of MNC in the world which had led to an emergence of new issue. More companies tended to become more mobile therefore the domestic government tends to create a new dimension in designing a new national tax policy. The second issue is that, the recognition of tax policies of home and host countries are interconnected which could influence the behavior of multinationals. There has been a great dal of evidence shows that after the changes of U.S. tax laws during 1980s, the home country tax policy affects both countries on the multinational firm’s behavior and the effectiveness of tax policy in the countries on the firm that operate and invest. Tax policies are closely related in affecting the volume and location of FDI as all other considerations are equal. Tax policies was an important determinant for FDI and MNCs yet it wasn’t a primary determinant to the country as tax policy can still have some impact on FDI flows that heavily focus on tax policies. According to Altshules, Grubert and Newlon(2001), they found that there is adverse effects between corporate tax rates and some multinational activities. Corporate tax could declare firm’s profit in decision making on placing investment. As they estimate that the impact of tax policies has a significant impact on multinational investments and becomes stronger. According to the recent comprehensive studies of Mutti (2003), corporate tax brings an extreme impact on multinational’s decision making. For an instance, a 1% increase in corporate tax could lead cost of capital increase of 3% in their production. Countries with high corporate tax would experience a high net outflow of FSI and decline in corporate tax revenue which become an evidence in affecting corporate tax revenue have a sharp decline in the countries of Organization for Economic Cooperation and Development (OEGD). Although part of the decline would attribute to changes in tax codes and business-cycle, suggest that additional factors may word which is adjusting the size of FDI flows. The power of corporate tax policies would pursued by one country which can affect another countries in an different ways, for an instance, if domestic country’s tax burden is higher than the other countries, the tax base may shift their FDI to a country which carries a less tax regime which implying the outward flows of FDI that can attract more inward investment flows as well. Domestic taxes should increase for outflows in exemption countries because firms can escape domestic taxation by investing abroad. Moreover, FDI outflows in credit countries should be less sensitive to taxes because they have no ways to escape domestic taxation. Yet the most common reasons that FDI affects corporate tax revenue are through the transfer pricing. For multinational country with high-tax country which producing goods from low-tax country, this inter-firm trade would overstate the price of their products because this could increase the profits in the low-tax country but reduce profit in high-tax country. Therefore as a conclusion on how tax policies could affecting the pattern of FDI brings a huge impact as tax policies could affecting a MNC in decision making that might eliminate and limited the profit making for companies which involved in FDI activities.
Government regulation of foreign countries could be a barrier for company involved in FDI as different countries carries different regulation and pattern and closely increase a countries’ current account balance. Government policies are designed to protect and assist both consumers and organizations. First, when the foreign Federal Government enacts the laws and regulations on their country, the government will assists specific organizations to implement with the laws and regulations with the financial resources provided. Therefore, it’s important for parent company to conduct studies research on foreign government’s regulation before they place their FDI to avoid unnecessary problems. In other words, domestic and international politics have tremendously differences between their government regulation of businesses due to different cultural and thinking. Therefore most of the companies that planned to place a FDI would prefer dealing with the national government in shaping business regulations rather than dealing with the international government because the policies and cultural are not clearly defined. Companies would need time to get used and understand the pattern of the living cultural environment and foreign government regulation which is time consuming. That’s the reason that domestic company prefer to dealing with the national governments because of the trust and relationship that they have built with the domestic government in shaping the business environment and the differences between the cultural is smaller if compare with international. Business policies shaped by the national government are more familiar and clearly defined as opposed to regulations from the international governments.
(Osman Masahudu Gunu, 2009). The response of FDI to different tax rate level may may due to different across economic sectors.
FDI in natural resources could have a dramatic impact on the balance of payments and the tax revenues of the host country where the natural resources are found. Due to the exchange rate fluctuation, the taxes such as tariff charged by host countries’ government could be a burden for MNC company. The tax rate would significantly high differences over the time between countries that affecting after-tax return to MNCs that involved in FDI, high taxes from government would restrict growth through FDI if human and capital resources are prevented from reallocation. Due to ample evidence, countries with lower tax rate could attract more FDI than countries that offering high tax rate as high taxes could deter FDI. FDI and economic growth is in a comprehensive manner which the volume and location of FDI is sensitive towards the tax treatment. It can be argued that countries may only benefit from foreign investment inflows if they have appropriate with local government regulations.
自然资源方面的外国直接投资可能对发现自然资源的东道国的收支平衡和税收产生重大影响。由于汇率的波动，东道国政府收取的关税等税收可能会成为跨国公司的负担。税率在不同国家之间的时间会有很大的差异，这影响到涉及外国直接投资的跨国公司的税后回报，如果阻止人力和资本资源的重新分配，政府的高税收会限制外国直接投资的增长。有充分的证据表明，税率较低的国家可能比税率较高的国家吸引更多的FDI，因为高税率会抑制FDI。外国直接投资与经济增长是一个综合的方式，外国直接投资的数量和位置对税收待遇是敏感的。可以说，只有在当地政府有适当规定的情况下，国家才可能从外国投资流入中受益。
Government regulations such as restrict on employment law could brings a problem to the MNCs as it brings a lower labour market turnover and the cost of employing foreigners workers to work at local companies could be cheaper. A similar argument can be made for other forms of government regulations, such as protecting both foreign and domestic investors by ensuring creditor rights and enforcement of contracts. Both are difficult tasks involving high uncertainty, time consuming and high cost. Researchers examined that the impact of regulations across countries are heavily rely on few resources which include political risk. (Sabac , Florin M, 2010)
政府对雇佣法的限制等规定可能会给跨国公司带来问题，因为这将降低劳动力市场的成交量，而且在当地公司雇佣外籍工人的成本可能会更低。对于其他形式的政府规章也可以提出类似的论点，例如通过确保债权人权利和合同的执行来保护外国和国内投资者。这两者都是非常困难的任务，涉及高度的不确定性，耗时和高成本。研究人员研究发现，各国监管的影响严重依赖于包括政治风险在内的少数资源。(Sabac, Florin M, 2010)
Political risk is referring to risk that political events and processes that happened in the host country which can closely affect the relationships between the host and home country. This brings enormous negative impacts towards the companies that placed their FDI in the particular countries. During the political risk, the taxes could increase dramatically and the alternatives for host governments to alter the cash flows from foreign operations in order to reduce cash flow due to higher taxes. Foreign governments will likely choose to do so only if the expected benefits of the expropriation or other cost to the multinational firm exceed the expected costs to the foreign government of these actions. The motivations of host countries to impose political costs have been on the effects of expropriation and reduce the number of companies that goes for FDI. Political tradition tends to influence the pattern of FDI because it influences the MNC’s investment decision making on placing FDI. For an instance, US state governments provided a grants training and labor skill development in their attempts to attract more MNCs interested to place their FDI at US. The way state government conducted the training is based on political tradition by confronting management are strong in Midwest, Northeast and other old industrial heartland. This shows that the political tradition has weaken the implementation of the existing state government investment by attracting more FDI. Consequently, although Midwest and Northeast have enormous number of major FDI projects buy they do not have a strong political tradition on confrontational their labor unions. Therefore, to attract more MNCs investment, government shouldn’t carry too much traditional thinking on developing the economics of the country. (Millward, 1999).
As a conclusion, the impact on the changes of tax policies and government regulations could heavily affecting the pattern of FDI. The restrictive of government regulations may prevent the productivity increase which related to the exploitation of technology by the FDI inflows. Tax policies and government regulation are closely related to each other
综上所述，税收政策和政府法规变化的影响可能会严重影响外国直接投资的模式。政府管制的限制性可能会阻碍外国直接投资流入的技术开发相关的生产力的提高。税收政策与政府监管是密切相关的
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