Financial Analysis Between Three Countries

1
Introduction
This term paper is prepared with an intention to meet the partial requirement of the course
International Financial Management (FIN 425). We have chosen to work on the term paper
named "Financial Analysis of Three Countries for this purpose.
Objective of the Study:
The objective of this term paper is to get familiarize with the real market situation and
compare it with the theoretical concepts. The main objective of this term paper is to have an
overall idea of the economy of USA, France and Bangladesh. In addition, the term paper
seeks to achieve the following objectives:
1. To find out the relationship between the percentage change in trade balance and the
exchange rate between this 3 countries.
2. To have an overall idea about the interest rate, inflation and GDP growth rate of this 3
countries.
3. To find out the different patterns of the exchange rates between this 3 countries and the
logic behind their fluctuation.
4. To find out the co-relationship and standard deviation of the currencies of this 3
countries.
Methodology of the Study:
Mostly we have collected data from secondary sources to conduct the analysis of this term
paper.

2

Scope of the Study:
1. We were able to know about the overall economy of USA, France and Bangladesh and
their policies to conduct international business.
2. We were able to know about the different reasons behind the fluctuations in trade
balance, exchange rate, interest rate, inflation rate and GDP growth rate between these 3
countries.
3. We were able to know the relationship between different variables of this 3 countries.
Limitations of the Study:
1. The insufficiency of information is the main constraint of the study.
2. Inexperience and time limitations created some obstacles.
3. Regular class schedule, assignments and examinations of other courses created some
problems.

3

Country Overview
Bangladesh:
Bangladesh is located in Southern Asia, bordered by India to the north, west and east,
Myanmar to the southeast and the Bay of Bengal to the south. It is a parliamentary
democratic country. The countrys total land area is 143,998 sq. km out of which 130,168 sq.
km is land and 13,830 sq. km is water. Capital of Bangladesh is Dhaka. According to an
estimation of July 2013, Bangladesh has now a population of 163,654,860 and the population
growth rate is 1.59%. The ethnic group of Bangladeshi people is 98% Bengali and 2% others
which includes tribal group and non-Bengali Muslims. Bangladesh is a Muslim country;
89.5% Bangladeshi people are Muslim religious, 9.6% are Hindu and 0.9% is other religious
people. The mother language of Bangladeshi people is called Bangla. The literacy rate of
Bangladesh is 75.5%. Despite of political instability, poor infrastructure, corruption,
insufficient power supplies and slow implementation of economic reforms in Bangladesh, its
economy has grown 5.8% per year since 1996.

4

Inflation Rate (2009-2013):

Figure 01: Inflation Rate in Bangladesh
In the above graph, we can see that the trend line of inflation rate of Bangladesh has gone
upwards from 2009 to 2011 but from 2011 to 2013, it went downwards.
Reasons:
Excess Money Borrowed:
In the last 5 years, government borrowed excess money from central bank to deal with
crisis. As a result, prices end up rising at an extremely high speed to keep up with the
currency surplus.
Wage Increase of Employment:
Wages in the major employment or in the public sector in Bangladesh has been increasing
for more than last two decades due to both strong and moderately strong labor union and
increased wages lead to the rising inflation from 2009 to 2011.
Exchange Rate Fluctuations:
Exchange rate fluctuations also caused the increase in inflation in Bangladesh like
depreciation of taka, rising import prices, growth of reserve money, etc.

2009 2010 2011 2012 2013
Series1 5.4 8.1 10.7 8.7 6.57
0
2
4
6
8
10
12
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Inflation Rate in Bangladesh

5

Interest Rate (2009-2013):

Figure 02: Interest Rate in Bangladesh
In the above graph, we can see that the interest rate of Bangladesh was 7.6 percent in 2009;
then it consistently gone down during 2010, 2011 and 2012 and came down to 4.2 percent in
2012. Then again it went up in 2013 to 6 percent.
Reason:
Monetary Policy:
It means government has printed excess money. When more money is available to lenders
and borrowers, the interest rate gets lower and when the supply of money is lowered, this
tightens monetary policy and causes interest rates to rise like it did in 2013.

2009 2010 2011 2012 2013
Series1 7.6 6.1 5.3 4.2 6
0
1
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3
4
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8
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Interest Rate in Bangladesh

6

GDP Growth Rate (2009-2013):

Figure 03: GDP Growth Rate in Bangladesh
The GDP growth rate in Bangladesh was 5.7 percent in 2009. Like the inflation rate, GDP
growth rate has also gone upward to 6.7 percent in between 2009 and 2011 and between 2011
and 2013, it again went down to 6 percent.
Reason:
Industrialization of Agricultural Sector:
The GDP growth was largely pushed by the industry sector which has exhibited average
growth rates in excess of GDP growth over the entire period. Over the last three years, it
grew at an average rate of 6.3%. The key to the growth of Bangladesh economy is in
more industrialization of agricultural sector.

2009 2010 2011 2012 2013
Series1 5.7 6.1 6.7 6.2 6.0
5.0
5.5
6.0
6.5
7.0
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GDP Growth Rate in Bangladesh

7

United States of America (USA):
The United States of America (USA) is the world's leading economic and military powered
country with global interests and a supreme global reach. It is situated between Canada and
Mexico, bordering both the North Atlantic Ocean and the North Pacific Ocean. It has a total
area of 9,826,675 sq. km of which 9,161,966 sq. km is land and 664,709 sq. km is water. The
capital of USA is Washington DC. According to an estimation of 2013, USA contains a
population of 316,668,567 and the population growth rate is 0.9%. The nationality of the
people of USA is American. Different American people follow different religion. In USA
51.3% are Protestant religion followers, 23.9% Roman Catholic, 1.7% Mormon, other
Christian 1.6%, Jewish 1.7%, Buddhist 0.7%, Muslim 0.6%, other or unspecified 2.5%,
unaffiliated 12.1% and none 4%. The main language of American people is English but some
of them also speak Spanish and other languages. Their literacy rate is 99%. Their
Government type is Constitution-based federal republic; strong democratic tradition. The
United States is considered a developed, post-industrial country with a "capitalist mixed
economy" fueled by wide-ranging natural resources and a sustained period of global
economic dominance.

8


Figure 04: Inflation Rate in USA
The inflation rate in USA was recorded 2.70% in 2009. Inflation Rate in the United States
went down from 2.7 to 1.5 in 2010 but in the very next year it again gone up to 3 percent.
From 2011 to 2013, the inflation rate is consistently gone down and came down to 1.5 in
2013.
Reasons:
Market Power:
They have the market power to manipulate the inflation rate. That means, they can
increase or decrease the inflation whenever they want.
Increase in Wage Rate:
The wage rate increases by 3-4% per year and when income rises, the prices of regular
commodities also rises in the same way.
Slow Bank Lending:
Another cause for inflation is that the bank lending of USA is slow because banks of USA
are under considerable inspection and observation from regulators that want to ensure that
the excessive lending does not collapse the entire financial system which happened in the
previous years.

2009 2010 2011 2012 2013
Series1 2.7 1.5 3 1.7 1.5
0
0.5
1
1.5
2
2.5
3
3.5
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Inflation Rate in USA

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Figure 05: Interest Rate in USA
The interest rate of USA has consistently gone down from 2.5 to 1.3 in between 2009 and
2012.
Reason:
Demand for Credit:
There was a decrease in the demand for credit in 2012 in USA. In 2013, the interest rate
increased by approximately 0.4 percent; it is because there was a slight increase in the
demand for credit. The US government also played a huge part in changing the interest
rate.

2009 2010 2011 2012 2013
Series1 2.5 2 1.5 1.3 1.7
0
0.5
1
1.5
2
2.5
3
P
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Interest Rate in USA

10


Figure 06: GDP Growth Rate in USA
The GDP growth rate of USA was negative in 2009 and then it did a huge jump to 2.5% in
2010. In between 2011 and 2013, the interest rate has fluctuated by approximately 1%.
Reason:
Consumer Consumption:
A high GDP partially reflects citizens ability to buy more than just their bare necessities
and can move on to things such as computers, high-end clothing and portable music
players. Moreover, the income and expenditures of US people are very high compared to
other developing countries.

2009 2010 2011 2012 2013
Series1 -2.8 2.5 1.8 2.8 1.9
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
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GDP Growth Rate in USA

11

France:
France is one of the most modern countries in the world and is a leader among European
nations. It is basically situated in Western Europe, bordering the Bay of Biscay and English
Channel between Belgium and Spain, southeast of the UK; bordering the Mediterranean Sea,
between Italy and Spain. The capital of France is Paris. France has an area of total 643,801
sq. km; 551,500 sq. km (metropolitan France) of which land is 640,427 sq. km; 549,970 sq.
km (metropolitan France) and water is 3,374 sq. km; 1,530 sq. km (metropolitan France). The
total population of France is 65,951,611 and the population growth is 0.49%. The nationality
of the people of France is French. Their official language is French which is spoken by 100%
of the French people. According to a survey of 2003, their literacy rate is 99%. French people
are basically Roman Catholic; some of them are Protestant, Jewish, Muslim and unaffiliated.
The French economy is diversified across all sectors. The government has partially or fully
privatized many large companies, including Air France, France Telecom, Renault and Thales.
However, the government maintains a strong presence in some sectors, particularly power,
public transport, and defense industries. France is the most visited country in the world and
maintains the third largest income in the world from tourism.

12


Figure 07: Inflation Rate in France
In the figure we can see that the inflation rate of France was negative in 2009 but in 2010 it
gone up to 1.505%. In 2011, again it increased to 2.117% but in 2012 it had a slight decrease.
On the other hand in 2013, it went down to below 1%.
Reason:
Cost Push Inflation:
Cost-Push inflation is currently affecting the French economy and causing not only rising
prices but also unemployment. This scenario happens when costs of production increases;
meaning the productivity would decline, causing a shift of the Aggregate Supply curve to
the left and because the supply of products falls, the prices of products rise. The increase
of price consequently results in increasing the inflation.

2009 2010 2011 2012 2013
Series1 -0.491 1.505 2.117 1.936 0.926
-1
-0.5
0
0.5
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1.5
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2.5
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Inflation Rate in France

13


Figure 08: Interest Rate in France
In the figure, we can see that the interest rate of France was 2.6% in 2009 but in 2010, it gone
up by 1% and resumed to 3.6%. From 2010 to 2013, the interest rate was fluctuating
insignificantly; means it was around 3.4% on average.
Reasons:
Fragile Economic Condition of France:
The French economy has slowed down in the last 5 years and its prospects remain fragile
and weak because of poor economic conditions in Europe and Frances lack of
competitiveness.
Economic Policies of The New President of France:
Frances economic recovery is the top priority of the new socialist president, Franois
Hollande. He wanted to achieve the goals by having new crisis management tools, the
European budget treaty, the banking union, etc. He also reformed tax by targeting high
household and corporate incomes. Also continue structural reforms to restore
competitiveness in the private sector, particularly in industry. So, because of this new
structural reform, the interest rate of France kept in a balanced way from 2010 to 2013,
means there was no significant change.
2009 2010 2011 2012 2013
Interest Rate 2.6 3.6 3.2 3.6 3.7
0
0.5
1
1.5
2
2.5
3
3.5
4
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Interest Rate in France

14


Figure 09: GDP Growth Rate in France
The Gross Domestic Product (GDP) growth rate of France was not that much significant in
the last 5 years. This is why in terms of GDP; France fell down in the world ranking table.
Reason:
Consumer Consumption:
In France, a changing social attitudes towards consumption has been noticed. A major
element of GDP is consumer consumption, if that changes over time, GDP fluctuates in
that way.

2009 2010 2011 2012 2013
Series1 -3.1 1.7 2.0 0.0 0.2
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
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GDP Growth Rate in France

15

Answer to Questions Related to International Flow of
Funds
Answer to Question No: 01 & 02
US Trend:

Figure 10: Balance of Trade of USA (2013-2014)
The above figure is the balance of trade of USA during June 2013 to May 2014. We can see
from the above graph that they are facing negative trade balance which signifies trade deficit.
Though the size of the deficit has varied during the time period, it still possess a healthy sum
of deficit. So, we can come up with an opinion that USA is mostly an import oriented nation.

-50,000
-40,000
-30,000
-20,000
-10,000
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M
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Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14
Series1 -36,552 -39,419 -39,515 -42,263 -39,083 -35,972 -37,393 -40,052 -42,586 -44,176 -47,037 -44,392
Balance of Trade of USA

16

Reasons:
Fluctuation in Dollar Value:
The dollar value has significantly fluctuated during the last 12 months which effected the
US balance of trade. During the first 6 months, the dollar value was significantly lower,
which increased their exports significantly and their balance of trade improved.
Moreover, on the later part of the time period, the dollar value raised again which reduced
their exports and also increased their trade deficit even more.
Economic Strength of USA:
The economic strength of USA has increased even more during the late 2013 to early
2014, which allowed them to import more from other nations. As a result, during
December 2013 to May 2014, their trade deficit has significantly increased.
Growth Among Trading Partners:
In the past, USA could not export that much because of the higher dollar value, their
product pricing and also because of the lack of trading partners that could afford such
expense but during the last year, many of the trading partners started to import more from
USA as their economic conditions improved than before. So, despite their higher pricing
and fluctuations in the dollar value, USA were able to export more, which reduced their
trade deficit during November 2013.

17

France Trend:

Figure 11: Balance of Trade of France (2013-2014)
The above figure is the balance of trade of France during June 2013 to May 2014. We can see
from the above figure that they are facing negative trade balance which signifies trade deficit
but significantly in a less margin than USA. During this 12 months, there were significant
fluctuations in the balance of trade.

-7000
-6000
-5000
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M
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Series1 -4882 -5411 -5128 -5722 -4788 -5471 -5249 -5761 -3834 -4867 -3933 -4866
Balance of Trade of France

18

Reasons:
High Level of Corporate Taxation:
The high level of corporate taxation in France is logically one of the principal causes of
the falling competitiveness of French industry on the global market and its growing trade
deficit. As the tax rate significantly increased during the late 2013 and the early 2014, it
discouraged different corporations both domestic and abroad to run their functions in
France. So, to meet the country demands, France heavily involved in import of different
products and services, which increased the trade deficit during January 2014.
Decline in Exports of Some Products:
During August 2013 to January 2014, exports declined because of the weaker sales of
metal products, chemicals, industrial machines and cars, which increased the trade deficit
for France even further.
Decreased Oil and Energy Prices:
France imports are mostly dominated by oil and energy. During February 2014, there was
a sharp drop in energy deliveries and oil prices which allowed France to import those in
less price than usual. As a result, their trade deficit decreased during February 2014.

19

Bangladesh Trend:

Figure 12: Balance of Trade of Bangladesh (2013-2014)
The above figure is the balance of trade of Bangladesh during June 2013 to May 2014. We
can see that the balance of trade is negative but not in a big margin compared to USA and
France. There has been a lot of fluctuations during last 12 months which signifies that they
are not too much dependent on imports rather trying increase the exports as much as possible.
Still, we can see a significant amount of trade deficit in the last 8 months except March 2014.
Reasons:
Ramadan and Eid Effect:
As Bangladesh is a Muslim based country, the product demand for different food items
and clothings increases during Ramadan and Eid. So, to meet the domestic demand, the
government stops exporting some necessary items and starts to import more, which
eventually increased the trade deficit in May 2014.
Import Decreased:
In March 2014, imports of fuel oil, food items, capital goods, raw materials and other
necessary items for the industry has gone down significantly which reduced the trade
deficit of Bangladesh.
-120
-100
-80
-60
-40
-20
0
B
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B
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Series1 -44.2 -49.4 -54.2 -37.9 -65.1 -74.2 -75.45 -96.53 -103.31 -56.78 -98.96 -103.76
Balance of Trade of Bangladesh

20

Answer to Question No: 03, 04 & 05
Relationship between Percentage Change in Trade Balance and Exchange Rate of USA and
Bangladesh:
The relationship between the percentage change in trade balance and the exchange rate of
USA and Bangladesh is negatively related as their relationship value is -10.99516785.
Relationship between Percentage Change in Trade Balance and Exchange Rate of USA and
France:
The relationship between the percentage change in trade balance and the exchange rate of
USA and France is positively related as their relationship value is 1.985145705.
.

21

Answer to Questions Related to I nternational Financial
Markets
Answer to Question No: 01 (a & b)

Currency & Amount Direct Exchange Rate
BDT 1.00 $0.0129
1.00 $1.3430

Answer to Question No: 01 (c, d & e)

Currency & Amount Exchange Rate
1.00 BDT 104.0768
BDT 1.00 0.0096

22

Answer to Question No: 01 (f)
EURO to USD:
The trend of the direct exchange rate of EURO is mostly gone upward as shown in the
following figure:

Figure 13: Direct Exchange Rate Trend of EURO (2010-2014)
Reasons for Abrupt Shifts:
Financial Crisis and Recession:
There was a financial crisis and recession during 2008-2010 when the Dollar sharply
appreciated which was a market response to the great uncertainty associated to these
economic troubles. As the economy gets stable from mid-2009 to mid-2010, the Dollar
started to depreciate again through the mid-2011.
Debt Crisis:
The uncertainty caused by the European sovereign debt crisis caused Dollar to appreciate
again through the end of 2011 but in the early of 2012, Dollar resumed its depreciation as
the Europe was getting financially normal.

23

BDT to USD:
The direct exchange rate trend line of BDT of last 5 years went upward from 2010 to 2012;
but from 2012 it suddenly went downward.

Figure 14: Direct Exchange Rate Trend of BDT (2010-2014)
Reason for Abrupt Shifts:
Debt-Ceiling Crisis:
United States faced a debt-ceiling crisis in 2011 when there was an ongoing political
debate in the United States Congress about the appropriate level of government spending
and its significant impact on the national debt and deficit as their total trade deficit was
$539.514 billion, which clearly affected the abrupt shift in the direct exchange rate of
U.S. dollar in 2012.

24

Answer to Question No: 01 (g)
USD to EURO:
The trend of the indirect exchange rate of EURO is mostly gone upward as shown in the
following figure:

Figure 15: Indirect Exchange Rate Trend of EURO (2010-2014)
Financial Crisis and Recession:
As we earlier mentioned, the financial crisis and recession during 2008-2010, when the
Dollar was appreciated the EURO was depreciated against the Dollar and again it
appreciated from mid-2010 to mid-2011. It faced depreciation again in the starting of
2012 but it clearly got its balance and appreciated throughout the year of 2014 as the
Europe was getting financially normal.

25

USD to BDT:
The indirect exchange rate trend line of BDT of last 5 years went downward from 2010 to
2012; but from 2012 it suddenly went upward.

Figure 16: Indirect Exchange Rate Trend of BDT (2010-2014)
Movement in Net Exports:
The sharp appreciation of USD has been seen in late 2011 to Jan 2012 against BDT, due
to the movement of net exports. An increase in net export increases the demand for
foreign exchange and puts pressure on BDT exchange rate against the USD.
Inward Remittance:
The percentage of inward remittance has been doubled during 2003-2012, which has been
an important source of foreign exchange from the supply side of the foreign exchange
market; as the supply of the BDT has been increased during 2012 and the currency has
been depreciated.

26

Comparison between Direct Exchange Rate Trend Line and Indirect Exchange Rate Trend
Line:
Our basic currency is USD and the counter currency is the EURO and BDT. By
comparing the trend of direct exchange rate and indirect exchange rate of USD, we can
see that whenever the trend of direct exchange rate appreciated against Dollar, the trend
of indirect exchange rate depreciated against EURO or BDT in the same way.
That means, in the last 5 years, whenever EURO and BDT currency became strong
against USD; that means USD got weaken against EURO and BDT, both of the trend line
rapidly fluctuated in the opposite direction.
When EURO and BDT appreciated against USD; means EURO and BDT became
stronger, it lead to exports becoming more expensive and imports cheaper for France and
Bangladesh. On the other hand when EURO and BDT depreciated against USD; the
exports became cheaper and imports more expensive.
When the EURO and BDT was depreciated in the trend; this would have been the
cheapest time for an American to visit France and Bangladesh or to purchase products
from these two countries but when EURO and BDT got strong against the USD; this
would have been the time when Frenchman or a Bangladeshi would have found the US
cheaper.
Answer to Question No: 01 (h)

Currency Percentage Change Over the Last Full Year
EURO 6.3294%.
BDT 3.4320%

27

Answer to Question No: 01 (i)

Currency Percentage Change Over the Last Full Year
BDT 6.9026%

As the value of BDT has risen to 6.9026% per EURO so BDT has devalued or depreciated
over this period against EURO. In other words, EURO has appreciated against BDT over this
period.
Answer to Question No: 01 (j)
Indirect in US:
Currency Bid-Ask Spread
EURO 0.01338%
BDT 0.1609%

Direct in US:
Currency Bid-Ask Spread
EURO to USD 0%
BDT to USD 1.5385%

28

Answer to Question No: 02

Exchange Rate Pattern Currency Exchange Rate
Direct 1.00 $1.3430
Indirect $ 1.00 0.7446

Relationship between Direct and Indirect Exchange Rate:
The relationship between direct exchange rate and the indirect exchange rate of EURO is
simply the give-and-take. For example, if an American wants to buy EURO in exchange of
Dollar, then it is indirect exchange rate but he or she wants to sell EURO in exchange of
Dollar, then it is direct exchange rate. Similarly in U.S. perspective, the direct exchange rate
of BDT is, BDT 1 is equal to $0.0129 and the indirect exchange rate of BDT is, $1 is equal to
BDT 77.70; means if an American wants to buy BDT in exchange of Dollar, then it is
indirect exchange rate but he wants to sell BDT in exchange of Dollar, then it is direct
exchange rate.

Bangladeshi importers need BDT 104.35 to convert into a EURO to purchase French product
today. On the other hand, it will take 0.0096 EURO to convert into 1 BDT. The relationship
between these cross exchange rates is if a Frenchman wants to buy Bangladeshi products in
BDT, then he has to pay 0.0096 EURO for each Bangladeshi taka. Similarly, if a Bangladeshi
wants to buy French products in EURO, then he has to pay BDT 104.35 for each EURO.

29

Answer to Questions Related to Exchange Rate
Determination
Current Situation of EURO against USD:

Figure 17: Exchange Rate of EURO for $1
From the above figure we can see that, the overall trend is downward sloping. It signifies that
the value of EURO is gaining strength or it is getting appreciated against Dollar.
Reasons:
Controlled Bond Yield than Before:
Up until 2012, there were concerns over the liquidity of many sovereign European
countries. Bond yields in countries such as Ireland, Italy, Portugal and Spain were rising
to dangerous levels. Since 2012, the ECB has been more willing to act and intervene in
the bond markets. This has helped reduce bond yields, giving more confidence in holding
EURO securities. The worst fears of the EURO bond crisis have eased, causing an
appreciation in the EURO.
Low Inflation:
Low inflation does make a currency more attractive. In the long term, relative inflation
rates play an important role in determining the level of a currency. As prices in Europe
are rising at a slower rate than USA, European goods become relatively more attractive
0.65
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0.75
0.80
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Exchange Rate of EURO for $1

30

and therefore, there is higher demand for EURO. Europe has one of the lowest inflation
rates in the world, so its goods are relatively competitive.
Signs of Improving Economic Activity:
Another reason for the relative strength of the EURO against Dollar are signs of
improving economic activity. Though the European unemployment is still at critical
levels but investors often look for small signs of the economy turning the corner. They
may think that signs of improved private sector activity leads to the possibility of future
growth; therefore in the medium or long-term, there is the prospect of a return to more
normal economic activity and therefore higher interest rates.
Improved Trade Deficit:
The overall trade deficit of the European countries has decreased within the time from
2008 to 2013 in comparison to USA. The domestic demand reduced imports while the
success of their efforts to become competitive helped their exports. As a result, value of
EURO has appreciated against Dollar.

31

Current Situation of BDT against USD:

Figure 18: Exchange Rate of BDT for $1
From the above figure we can see that, the overall trend is downward sloping. It signifies that
the value of BDT is gaining strength or it is getting appreciated against Dollar during the last
24 months.
Reasons:
Increase in Remittance and Exports:
In the month of July 2014, Bangladesh Bank has disclosed a record $1.48 billion inflow
of remittance. Moreover, in the fiscal year 2013-14, Bangladesh has earned $30.18 billion
from exports, which signifies that Bangladesh is becoming more involved in exports
rather than imports. As a result, because of the high inflow of remittance and export
revenue, the reserve of the foreign currency is increasing which touched to a record $22
billion milestone in August 2014, which is appreciating BDT against Dollar.
Large Amount of Foreign-Aid:
During the fiscal year 2012-13, Bangladesh has received a significant amount of foreign-
aids for different development projects and for other reasons, which appreciated the value
of BDT against Dollar.
Less Demand for USD:
During the period from 2011-2014, the imports have significantly reduced for
Bangladesh. During this time, Bangladesh started to export more and import less unless
necessary, which made the Dollar demand low within the country. As a result, the BDT
appreciated against US Dollar.
BDT 72.00
BDT 74.00
BDT 76.00
BDT 78.00
BDT 80.00
BDT 82.00
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2
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
J
a
n
-
1
3
F
e
b
M
a
r
A
p
r
M
a
y
J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
J
a
n
-
1
4
F
e
b
M
a
r
A
p
r
M
a
y
Exchange Rate of BDT for $1

32

Co-relationship between USD & BDT:
The co-relationship between USD and BDT of the last 24 months is -0.940503376 which is
closer to -1. This means, BDT moves in the opposite direction relative to USD at the
maximum occasion.
Co-relationship between USD & EURO:
The co-relationship between USD and EURO of the last 24 months is -0.999320406 which is
pretty closer to -1. This means, EURO moves in the opposite direction relative to USD at the
maximum occasion.
Comparison between the Standard Deviation of EURO and BDT:

Figure 19: Comparison between the Standard Deviation of Euro and BDT
From the above figure we can say that, EURO is more volatile than BDT, as the standard
deviation of Euro is 2.3196 which is higher than the standard deviation of BDT which is
0.8294.

0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
2.3196
0.8294
P
e
r
c
e
n
t
a
g
e

C
h
a
n
g
e
1
Standard Deviation of Euro 2.3196
Standard Deviation of BDT 0.8294
Comparison between Standard Deviation

33

Conclusion
We have analyzed the economics of USA, France and Bangladesh by using different
financial tools. We have analyzed their inflation rate, interest rate, GDP growth rate, their
trade balance and exchange rate in order to figure out its fluctuation with reasons and also
to figure out whether we can find any sort of relationship with them or not. In the overall
sense, USA and France are more in a driving position than Bangladesh but as a
developing country, it is emerging well. Still all of the 3 nations have problems of their
own like USA and France has large trade deficit and Bangladesh is still struggling to
increase their exports. So, in our opinion, all 3 nations should focus to improve their trade
balance because if they can reduce their trade deficits, ultimately it will improve their
currencies and their economy.

34

Appendix
Tables & Calculations Related to International Flow of Funds
Balance of Trade
(2013 - 2014)
Month France Bangladesh USA
(EUR Million) (BDT Billion) (Dollar Million)
Jun-13 -4882 -44.2 -36,552
Jul-13 -5411 -49.4 -39,419
Aug-13 -5128 -54.2 -39,515
Sep-13 -5722 -37.9 -42,263
Oct-13 -4788 -65.1 -39,083
Nov-13 -5471 -74.2 -35,972
Dec-13 -5249 -75.45 -37,393
Jan-14 -5761 -96.53 -40,052
Feb-14 -3834 -103.31 -42,586
Mar-14 -4867 -56.78 -44,176
Apr-14 -3933 -98.96 -47,037
May-14 -4866 -103.76 -44,392

35

USA & BANGLADESH
Month Trade Balance % Change in Trade Balance Direct Exchange Rate % Change in Exchange Rate
May-
12
-335.6
BDT 80.3942

Jun-12 -335.2 -0.12 BDT 80.6379 0.30
Jul-12 -426.8 27.33 BDT 80.0460 -0.73
Aug-
12
-397.3 -6.91 BDT 80.3554 0.39
Sep-12 -350.7 -11.73 BDT 80.4860 0.16
Oct-12 -316.1 -9.87 BDT 80.8540 0.46
Nov-
12
-336.2 6.36 BDT 79.7677 -1.34
Dec-12 -257.3 -23.47 BDT 79.9737 0.26
Jan-13 -463.4 80.10 BDT 78.3350 -2.05
Feb-13 -398.3 -14.05 BDT 78.1932 -0.18
Mar-13 -394.7 -0.90 BDT 77.4110 -1.00
Apr-13 -369.9 -6.28 BDT 76.5920 -1.06
May-
13
-384.1 3.84 BDT 76.5220 -0.09
Jun-13 -348.0 -9.40 BDT 76.2622 -0.34
Jul-13 -445.0 27.87 BDT 77.7500 1.95
Aug-
13
-472.0 6.07 BDT 76.5119 -1.59
Sep-13 -365.7 -22.52 BDT 76.4620 -0.07
Oct-13 -431.9 18.10 BDT 76.1265 -0.44
Nov-
13
-302.1 -30.05 BDT 76.1076 -0.02

36

Dec-13 -271.9 -10.00 BDT 76.4450 0.44
Jan-14 -420.2 54.54 BDT 76.2613 -0.24
Feb-14 -236.0 -43.84 BDT 76.6017 0.45
Mar-14 -235.4 -0.25 BDT 76.1827 -0.55
Apr-14 -384.7 63.42 BDT 76.2626 0.10
May-
14
-333.7 -13.26 BDT 76.5362 0.36

37

Regression Statistics
Multiple R 0.310616451
R Square 0.096482579
Adjusted R Square 0.055413606
Standard Error 28.53279597
Observations 24

ANOVA
df SS MS F Significance F
Regression 1 1912.598089 1912.598089 2.349281483 0.13959616
Residual 22 17910.64981 814.120446
Total 23 19823.2479

Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95%
Lower
95.0%
Upper
95.0%
Intercept 1.326775935 6.000742806 0.22110195 0.827052274 -11.11800296 13.77155483 -11.118003 13.77155483
X Variable 1
-
10.99516785 7.173553404
-
1.532736599 0.13959616 -25.87220706 3.881871356 -25.8722071 3.881871356

38

USA & FRANCE
Month Trade Balance % Change in Trade Balance Direct Exchange Rate % Change in Exchange Rate
May-
12
-551.3
0.7555

Jun-12 -792.3 43.71 0.8076 6.90
Jul-12 -1286.2 62.34 0.7893 -2.27
Aug-12 -859.2 -33.20 0.8141 3.14
Sep-12 -664.6 -22.65 0.7969 -2.11
Oct-12 -1179.5 77.48 0.7776 -2.42
Nov-12 -1120.1 -5.04 0.7708 -0.87
Dec-12 -925.6 -17.36 0.7693 -0.19
Jan-13 -756.9 -18.23 0.7573 -1.56
Feb-13 -952.6 25.86 0.7370 -2.68
Mar-13 -1220.3 28.10 0.7621 3.41
Apr-13 -1362.6 11.66 0.7800 2.35
May-
13
-1085.0 -20.37 0.7627 -2.22
Jun-13 -888.5 -18.11 0.7686 0.77
Jul-13 -1834.7 106.49 0.7685 -0.01
Aug-13 -775.8 -57.72 0.7536 -1.94
Sep-13 -901.2 16.16 0.7562 0.35
Oct-13 -1640.6 82.05 0.7402 -2.12
Nov-13 -1015.1 -38.13 0.7314 -1.19
Dec-13 -1529.7 50.69 0.7357 0.59
Jan-14 -901.9 -41.04 0.7253 -1.41
Feb-14 -1415.9 56.99 0.7389 1.88

39

Mar-14 -1650.0 16.53 0.7271 -1.60
Apr-14 -1426.6 -13.54 0.7263 -0.11
May-
14
-1221.3 -14.39 0.7229 -0.47

Regression Statistics
Multiple R 0.104724841
R Square 0.010967292
Adjusted R Square -0.03398874
Standard Error 44.71144761
Observations 24

ANOVA
df SS MS F Significance F
Regression 1 487.6956794 487.6956794 0.243955967 0.626258736
Residual 22 43980.49805 1999.113548

Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95%
Lower
95.0%
Upper
95.0%
Intercept 11.91005519 9.148835912 1.301810996 0.206447801 -7.06346921 30.88357959 -7.06346921 30.88357959
X Variable 1 1.985145705 4.019172679 0.493918989 0.626258736 -6.35010827 10.32039968 -6.35010827 10.32039968

40

Tables & Calculations Related to International Financial Markets
1. .
a) .
$
1.00 =
BDT
77.70
So, BDT 1.00 = $ (1.00/77.70)
=
$
0.0129

b) .
$
1.00 =

0.7446
So, 1.00 = $ (1.00/0.7446)
=
$
1.3430

c) .

0.7446 =
BDT
77.70
So, 1.00 = BDT (77.70/0.7446)
=
BDT
104.35

d) .

1.00 =
BDT
104.0768
So, BDT 1.00 = (1.00/104.0768)
=

0.0096

h)
Percentage change in EUR in terms of
USD = (0.7631-0.7148)/0.7631
= 6.3294%
Percentage change in BDT in terms of
USD = (79.400-76.675)/79.400
= 3.4320%

41

i).
Percentage change in BDT in terms of
EUR =
(109.0532-
101.5257)/109.0532
= 6.9026%

j)
Indirect in US
EUR
Bid Rate = 0.7456
Ask Rate = 0.7457

= = (0.7457-0.7456)/0.7457
Bid/Ask Spread = 0.0134%

Indirect in US
BDT
Bid Rate = BDT 77.5550
Ask Rate = BDT 77.6800

= = (77.68-77.555)/77.68

Direct in US
EUR to USD
Bid Rate = $ 1.3411
Ask Rate = $ 1.3411

= = (1.3411-1.3411)/1.3411

Direct in US
BDT to USD
Bid Rate = $ 0.0128
Ask Rate = $ 0.0130

= = (0.0130-0.0128)/0.0130

42

Tables & Calculations Related to Exchange Rate Determination
Foreign Exchange Rates - Monthly
Month USA (USD)
France
(Euro)
% Change
in Euro
Bangladesh
(BDT)
% Change in
BDT
May-
12
$ 1.00
0.76

BDT 80.39

Jun-12 $ 1.00 0.81 6.8961 BDT 80.64 0.3031
Jul $ 1.00 0.79 -2.2660 BDT 80.05 -0.7340
Aug $ 1.00 0.81 3.1420 BDT 80.36 0.3865
Sep $ 1.00 0.80 -2.1128 BDT 80.49 0.1625
Oct $ 1.00 0.78 -2.4219 BDT 80.85 0.4572
Nov $ 1.00 0.77 -0.8745 BDT 79.77 -1.3435
Dec $ 1.00 0.77 -0.1946 BDT 79.97 0.2582
Jan-13 $ 1.00 0.76 -1.5599 BDT 78.34 -2.0490
Feb $ 1.00 0.74 -2.6806 BDT 78.19 -0.1810
Mar $ 1.00 0.76 3.4057 BDT 77.41 -1.0003
Apr $ 1.00 0.78 2.3488 BDT 76.59 -1.0580
May $ 1.00 0.76 -2.2179 BDT 76.52 -0.0914
Jun $ 1.00 0.77 0.7736 BDT 76.26 -0.3395
Jul $ 1.00 0.77 -0.0130 BDT 77.75 1.9509
Aug $ 1.00 0.75 -1.9388 BDT 76.51 -1.5924
Sep $ 1.00 0.76 0.3450 BDT 76.46 -0.0652
Oct $ 1.00 0.74 -2.1158 BDT 76.13 -0.4388
Nov $ 1.00 0.73 -1.1889 BDT 76.11 -0.0248
Dec $ 1.00 0.74 0.5879 BDT 76.45 0.4433
Jan-14 $ 1.00 0.73 -1.4136 BDT 76.26 -0.2403
Feb $ 1.00 0.74 1.8751 BDT 76.60 0.4464
Mar $ 1.00 0.73 -1.5970 BDT 76.18 -0.5470
Apr $ 1.00 0.73 -0.1100 BDT 76.26 0.1049
May $ 1.00 0.72 -0.4681 BDT 76.54 0.3588

=STDEV(D4:D27) =STDEV(F4:F27)

2.3196

0.8294

43

Co-relationship Between USD & BDT
Month USA (USD) Bangladesh (BDT)
Jun-12
$ 0.0120
BDT 80.6379
Jul-12
$ 0.0121
BDT 80.0460
Aug-12
$ 0.0120
BDT 80.3554
Sep-12
$ 0.0120
BDT 80.4860
Oct-12
$ 0.0120
BDT 80.8540
Nov-12
$ 0.0121
BDT 79.7677
Dec-12
$ 0.0121
BDT 79.9737
Jan-13
$ 0.0123
BDT 78.3350
Feb-13
$ 0.0124
BDT 78.1932
Mar-13
$ 0.0125
BDT 77.4110
Apr-13
$ 0.0126
BDT 76.5920
May-
13 $ 0.0126
BDT 76.5220
Jun-13
$ 0.0127
BDT 76.2622
Jul-13
$ 0.0129
BDT 77.7500
Aug-13 $ 0.0126 BDT 76.5119
Sep-13
$ 0.0126
BDT 76.4620
Oct-13
$ 0.0127
BDT 76.1265
Nov-13
$ 0.0127
BDT 76.1076
Dec-13 $ 0.0126 BDT 76.4450
Jan-14
$ 0.0127
BDT 76.2613
Feb-14
$ 0.0126
BDT 76.6017
Mar-14
$ 0.0127
BDT 76.1827
Apr-14 $ 0.0127 BDT 76.2626
May-
14 $ 0.0126
BDT 76.5362

-0.940503376

44

Co-relationship Between USD & EURO
Month USA (USD) France (Euro)
Jun-12
$ 1.2381
0.8076
Jul-12
$ 1.2660
0.7893
Aug-12
$ 1.2282
0.8141
Sep-12
$ 1.2547
0.7969
Oct-12
$ 1.2854
0.7776
Nov-12
$ 1.2972
0.7708
Dec-12
$ 1.2996
0.7693
Jan-13
$ 1.3203
0.7573
Feb-13
$ 1.3566
0.7370
Mar-13
$ 1.3120
0.7621
Apr-13
$ 1.2816
0.7800
May-
13 $ 1.3110
0.7627
Jun-13
$ 1.3010
0.7686
Jul-13
$ 1.3007
0.7685
Aug-13 $ 1.3268 0.7536
Sep-13
$ 1.3218
0.7562
Oct-13
$ 1.3508
0.7402
Nov-13
$ 1.3671
0.7314
Dec-13 $ 1.3589 0.7357
Jan-14
$ 1.3786
0.7253
Feb-14
$ 1.3532
0.7389
Mar-14
$ 1.3751
0.7271
Apr-14 $ 1.3767 0.7263
May-
14 $ 1.3832
0.7229

-0.999320406

45

References
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Available at: http://about-france.com/geo/french-economy.htm
[Accessed 7 August 2014].
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Anon., 2014. Financial Pipeline. [Online]
Available at: http://www.finpipe.com/why-do-interest-rates-change/
Anon., 2014. Global Rates. [Online]
Available at: http://www.global-rates.com/economic-indicators/inflation/consumer-
prices/cpi/france.aspx
Anon., 2014. Index Mundi. [Online]
Available at: http://www.indexmundi.com/g/g.aspx?c=bg&v=71
Available at: http://www.indexmundi.com/united_states/
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Available at: http://www.oanda.com/currency/historical-rates/

46

Anon., 2014. The World Bank. [Online]
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FELDSTEIN, M., 2013. Why is U.S. inflation so low?. [Online]
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commercial-bank-reserves-by-martin-feldstein
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47

high-of-1.48-bn-in-july
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the-euro/
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Available at: http://www.guywagnerblog.com/eng/entry/strong-euro-or-weak-dollar

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