well made video, but the video is silent on whar should be the X -axis of the upper graph. Is " supply for euro" the X-axis of upper graph , since return on euro deposit is showing a downward curve? But then how the interest on euro curve is shifting downwards on euro supply increase
rate of return in dollar terms is the x-axis of upper graph, you can see it on the video as rate of return in dollar terms increasing, expected return on euro deposits decrease (x-axis) as dollar depreciates or euro appreciates, expected return on euro deposits will increase (y-axis)
Is this stacked chart the standard illustration in all textbooks & courses? If so, then it's confusing. Show the simultaneous process vertically (side-by-side) and stretch out the chart horizontally to fill the screen, using numbered back-and-forth arrows between the money market and FX market to indicate the flow of events. Just like with the illustration of money flows between Market A and Market B. Follow the story along the x-axis first, and then look up to see where the equilibrium story ends up. It's easier on the eyes & mind, which are trained to view the x-axis along the bottom, anyway.
great work, could you also do a video of what happens to the equilibrium in the long run. :)
Amazing video! Helped us a lot. Greetings from Germany :)
You are welcome.
your lecture was very helpful for me in understanding this phenomenon. thanks
This really helped clear up my confusion on this matter, thank you!
You're welcome.
respectt you helped me from 7 years ago
very good simple explanation, thanks heaps
these are great, youre a legend
this was great sir
well made video, but the video is silent on whar should be the X -axis of the upper graph. Is " supply for euro" the X-axis of upper graph , since return on euro deposit is showing a downward curve? But then how the interest on euro curve is shifting downwards on euro supply increase
rate of return in dollar terms is the x-axis of upper graph, you can see it on the video
as rate of return in dollar terms increasing, expected return on euro deposits decrease (x-axis)
as dollar depreciates or euro appreciates, expected return on euro deposits will increase (y-axis)
Why does ER increase? $1 depreciates so slides from .85 to .80 euros? ER$/€ decreases? Why do MS € changes not affect $ just like MS$ shifts do?
Is this stacked chart the standard illustration in all textbooks & courses? If so, then it's confusing. Show the simultaneous process vertically (side-by-side) and stretch out the chart horizontally to fill the screen, using numbered back-and-forth arrows between the money market and FX market to indicate the flow of events. Just like with the illustration of money flows between Market A and Market B. Follow the story along the x-axis first, and then look up to see where the equilibrium story ends up. It's easier on the eyes & mind, which are trained to view the x-axis along the bottom, anyway.
Hi Prof Pascale, what software do you use to draw the chart?
If TH-cam allowed to download trimmed that was 💯
What kind of software are you using?
Omnigraph Sketcher.