THE BANK FOR INTERNATIONAL DEVELOPMENT
Exhibit 2
Selected Historical Interest Rates, Inflation Rates, & Exchange Rates
Date 90-day 90-day Qtrly Qtrly Fwrd Ex Spot Ex
(end of Euro Yen Euro $ Japan U.S. 90-day Rate
month) Rate Rate CPI Infl CPI Infl Y/$ Y/$
----- ------------- ------------- ------------- Japan U.S. --------------- ---------------
Jan-76 0.01242 0.01287 0.03394 0.01037 303.80 303.70
Feb-76 0.01302 0.01362 0.03117 0.01329 302.30 302.25
Mar-76 0.01513 0.01348 0.02975 0.01473 302.80 299.70
Apr-76 0.01242 0.01319 0.0101 0.01613 299.43 299.40
May-76 0.01692 0.01587 -0.0013 0.01603 300.60 299.95
Jun-76 0.01482 0.01467 0.02387 0.01451 298.33 297.40
Jul-76 0.01527 0.01379 0.025 0.01299 294.00 293.40
Aug-76 0.01453 0.01362 0.03405 0.01004 289.45 288.75
Sep-76 0.01601 0.01408 0.01595 0.01001 288.15 287.45
Oct-76 0.01482 0.01302 0.01951 0.0114 294.93 293.70
Nov-76 0.01632 0.01259 0.02561 0.01989 296.95 295.75
Dec-76 0.01615 0.01227 0.02174 0.02266 293.60 292.80
Jan-77 0.01453 0.01287 0.02871 0.02535 288.80 289.30
Feb-77 0.01376 0.01259 0.0321 0.0195 284.20 282.70
Mar-77 0.01573 0.01273 0.02009 0.02078 278.55 277.50
Apr-77 0.01316 0.01287 0.00116 0.01648 277.85 277.70
May-77 0.01376 0.01482 -0.0081 0.01503 277.21 277.30
Jun-77 0.01436 0.01408 0.01622 0.01221 266.77 267.70
Jul-77 0.01467 0.01527 0.02323 0.01081 266.20 266.00
Aug-77 0.01242 0.01527 0.01161 0.01077 266.85 267.30
Sep-77 0.00985 0.01675 -0.0091 0.01072 263.35 265.45
Oct-77 0.00985 0.01751 -0.0102 0.01471 248.60 250.60
Nov-77 0.00202 0.01677 0.00574 0.01598 242.34 245.70
Dec-77 0.00449 0.01751 0.01726 0.01989 236.93 240.00
Jan-78 0.00727 0.01765 0.02408 0.0224 239.30 241.40
Feb-78 0.00619 0.01751 0.02511 0.02621 235.95 238.70
Mar-78 0.00296 0.01824 0.01018 0.02861 220.30 222.40
Apr-78 0.00526 0.01853 0.00448 0.02706 220.55 222.90
May-78 0.00666 0.01943 0 0.02299 220.25 223.40
Jun-78 0.00727 0.02105 0.01792 0.02149 201.65 204.70
Jul-78 0.00388 0.0206 0.01449 0.02133 187.75 190.70
Aug-78 0.00619 0.02147 0.00334 0.02122 187.15 190.20
Sep-78 0.00695 0.02281 -0.011 0.01733 186.00 189.15
Oct-78 0.00604 0.02729 -0.011 0.01843 172.40 176.00
Nov-78 0.00077 0.02773 -0.0044 0.02567 192.75 197.50
Dec-78 0.00155 0.02802 0.00556 0.03041 189.80 194.60
Jan-79 0.00634 0.02483 0.01889 0.03378 197.50 201.30
Feb-79 0.00849 0.02528 0.03233 0.03456 198.65 202.20
Mar-79 0.01467 0.02528 0.02544 0.0366 207.20 209.30
Apr-79 0.01213 0.02585 0.01963 0.03501 216.25 218.50
May-79 0.01287 0.02514 -0.0011 0.03226 217.00 219.80
Jun-79 0.01408 0.02528 0.01079 0.03075 214.45 217.00
Jul-79 0.01467 0.02715 0.01497 0.02931 214.20 217.20
Aug-79 0.01706 0.02901 0.02162 0.02902 217.35 220.00
Sep-79 0.01779 0.03046 0.01494 0.02983 220.40 223.30
Oct-79 0.01928 0.03711 0.01264 0.03505 233.20 237.70
Nov-79 0.02119 0.0333 0.02434 0.03905 246.45 248.80
Dec-79 0.02016 0.0343 0.02419 0.04292 236.55 239.70
Jan-80 0.02002 0.03414 0.03226 0.04021 235.50 238.80
Feb-80 0.02439 0.0399 0.03409 0.03549 246.05 249.80
Mar-80 0.03668 0.04596 0.03285 0.03189 247.40 249.70
Apr-80 0.02988 0.03414 0.01411 0.02136 237.50 239.00
May-80 0.02931 0.02439 0.002 0.01915 225.90 224.30
Jun-80 0.02931 0.02353 0.01491 0.01695 219.65 217.60
Jul-80 0.02931 0.02367 0.0169 0.0249 228.65 227.00
Aug-80 0.02786 0.02938 0.02193 0.02671 219.05 219.00
Sep-80 0.02931 0.03287 0 0.02647 211.30 212.20
Oct-80 0.02323 0.03639 0.00782 0.02624 209.10 211.50
Nov-80 0.02439 0.04238 0.00488 0.02697 212.65 216.70
Dec-80 0.02236 0.04141 0.01371 0.02579 199.45 203.00
Jan-81 0.0206 0.04114 0.01164 0.02367 200.70 204.70
Feb-81 0.02089 0.03919 0.02136 0.02251 204.65 208.80
Mar-81 0.01853 0.03513 0.01739 0.02328 207.70 211.00
Apr-81 0.01794 0.03974 0.00671 0.02868 210.05 215.00
May-81 0.01884 0.04169 -0.0076 0.02752 217.90 224.10
Jun-81 0.01824 0.04183 0.0076 0.03003 219.95 225.80
Jul-81 0.01734 0.04374 0.01429 0.01978 232.80 239.45
Aug-81 0.01824 0.04322 0.01724 0.01518 222.45 228.00
Sep-81 0.01867 0.04169 0.00377 0.00795 225.75 232.70
Oct-81 0.01765 0.03711 0 0.0097 228.40 233.80
Nov-81 0.01779 0.02874 0 0.00967 211.75 214.30
Dec-81 0.01496 0.03273 -0.0009 0.00526 216.35 219.90
Jan-82 0.01556 0.03443 0.00657 0.00611 223.75 230.50
Feb-82 0.01573 0.03542 0.01318 0.01307 230.30 237.00
Mar-82 0.01646 0.03639 0.01128 0.02616 243.05 246.50
Apr-82 0.01692 0.03542 -0.0037 0.02778 231.75 235.10
May-82 0.01734 0.03416 0 0.01978 239.25 243.50
Jun-82 0.01765 0.03738 0.01766 0.00935 250.15 254.00
Jul-82 0.01734 0.03116 0.02809 0.00676 252.70 257.50
Aug-82 0.01779 0.02846 0.00929 0.00337 256.80 261.70
Sep-82 0.01765 0.02745 -0.01 -0.0025 266.50 269.50
Oct-82 0.01675 0.02411 -0.0109 -0.0034 275.30 277.30
Nov-82 0.01765 0.02383 -0.0037 -0.0017 251.90 253.10
Dec-82 0.01646 0.02222 0.00461 0.00338 233.90 235.00
Jan-83 0.01601 0.02236 0.00645 0.00758 236.85 237.90
Feb-83 0.01618 0.02119 0.02126 0.01347 234.28 235.45
Mar-83 0.01558 0.02325 0.00735 0.01598 237.45 239.40
Apr-83 0.01513 0.0215 -0.0009 0.01337 236.08 237.00
May-83 0.01541 0.02281 -0.0145 0.0108 236.81 238.30
Jun-83 0.01587 0.02339 0.00547 0.01242 237.85 239.70
Jul-83 0.01587 0.02456 0.01923 0.01072 239.30 241.70
Aug-83 0.01618 0.0247 0.01561 0.00904 244.61 246.60
Sep-83 0.01632 0.02295 0 0.00572 234.42 236.10
Oct-83 0.01541 0.02325 -0.0063 0.00897 231.73 233.65
Nov-83 0.01646 0.02353 0.00633 0.0114 232.50 234.00
Dec-83 0.01541 0.02367 0.01179 0.0122 230.05 232.20
Jan-84 0.01541 0.02325 0.01175 0.01132 232.80 234.75
Feb-84 0.01601 0.02442 0.01258 0.01047 229.71 233.50
Mar-84 0.01513 0.02558 0.00179 0.01124 222.37 224.70
Apr-84 0.01513 0.02629 0.00089 0.00959 223.67 225.95
May-84 0.01558 0.02816 -0.0151 0.01036 228.50 231.50
Jun-84 0.01513 0.02904 0.00894 0.01191 233.95 237.50
Jul-84 0.01541 0.0283 0.01518 0.01188 242.07 245.50
Aug-84 0.01541 0.02846 0.01802 0.00789 238.39 241.30
Sep-84 0.01541 0.02731 0.00355 0.00314 242.30 245.50
Oct-84 0.01541 0.02411 0.00088 0.00235 242.95 245.25
Nov-84 0.01541 0.02192 -0.0009 0.00626 244.80 246.30
Dec-84 0.01513 0.02091 0.00177 0.01095 249.94 251.10
Jan-85 0.01541 0.02046 0.00176 0.01249 253.38 254.65
Feb-85 0.01558 0.02281 0.01417 0.01244 257.02 259.50
Mar-85 0.01541 0.02178 0.01058 0.01084 249.03 252.50
Apr-85 0.01527 0.02105 0.00614 0.00848 249.84 252.25
May-85 0.01527 0.01855 -0.0079 0.00691 250.86 251.85
Jun-85 0.01527 0.01884 0.00087 0.00689 247.98 248.95
Jul-85 0.01541 0.01987 0.01395 0.00841 235.48 236.65
Aug-85 0.01558 0.01943 0.0132 0.00915 236.12 237.25
Sep-85 0.01558 0.01957 0.00436 0.00913 215.07 217.00
Oct-85 0.01884 0.01928 -0.0077 0.0091 211.61 211.50
THE BANK FOR INTERNATIONAL DEVELOPMENT
Harvard Business School
Case Software 2-289-534
Copyright (c) 1989 by the President and Fellows of Harvard College
Developed in conjunction with MicroMentor, Inc., Cambridge, MA
This worksheet forms an integral part of Harvard Business School
case N9-289-034: The Bank for International Development.
This worksheet was prepared as the basis for class discussion rather
than to illustrate either effective or ineffective handling of an
administrative situation.
WORKSHEET CONTENTS
This worksheet contains historical data on interest rates, inflation
rates, and exchange rates for the United States and Japan over the
period January 1976 through October 1985. A facsimile of part of
the worksheet appears as Exhibit 2 in the case: The Bank For
International Development (#N9-289-034).
[PGDN] for instructions and questions
COLUMN HEADING DEFINITIONS
90-day Euro Yen Rate
Nominal rate of return on 90-day Euroyen deposits
expressed on a quarterly (non-annualized) basis as
of the end of the month. The 'Jan 76' entry is the
Euroyen yield to maturity over Feb-Mar-Apr 1976.
90-day Euro $ Rate
Nominal rate of return on 90-day Eurodollar deposits
expressed on a quarterly (non-annualized) basis as
of the end of the month. The 'Jan 76' entry is the
Eurodollar yield to maturity over Feb-Mar-Apr 1976.
Qtrly Japan CPI Infl
Realized Japanese consumer price inflation over the
quarter beginning at the end of the month expressed
on a quarterly basis. The 'Jan 76' entry is the
inflation rate over Feb-Mar-Apr 1976.
Qtrly U.S. CPI Infl
Realized U.S. consumer price inflation over the
quarter beginning at the end of the month expressed
on a quarterly basis. The 'Jan 76' entry is the
inflation rate over Feb-Mar-Apr 1976.
Fwrd Ex 90-day Y/$
The 90-day forward exchange rate, in yen/dollar, at the
end of the month. The 'Jan 76' entry is the price on
January 31 for a forward contract expiring in 90 days.
Spot Ex Rate Y/$
The nominal spot exchange rate, in yen/dollar, at the
end of the month. The 'Jan 76' entry is the spot price
on January 31, 1976.
REVISION HISTORY
Date Name Explanation of Change
------------- ------------- ------------- ------------- ------------- --------------- ---------------
01/09/89 J. Carter/ MicroMentor, Inc., Cambridge, MA
P. Brantley Base implementation
02/01/95 K. Butler Addition of study questions
STUDY QUESTIONS FOR FI 860
Hit [HOME] to go to the data
Use the International Parity Conditions as you analyze the following questions.
(Note: One period is equal to one quarter in the symbols below.
For example, S1Y/$ is the spot rate one quarter (3 months) into the future.)
1. Does forward parity hold?
a. Create two new columns with (F1Y/$)/(S0Y/$) and (S1Y/$)/(S0Y/$)
b. Create another new column with (F1Y/$)/(S0Y/$) - (S1Y/$)/(S0Y/$)
c. Plot (F1Y/$)/(S0Y/$) against (S1Y/$)/(S0Y/$)
d. Calculate r-squared for (F1Y/$)/(S0Y/$) on (S1Y/$)/(S0Y/$)
Optional e. Plot (F1Y/$)/(S0Y/$) - (S1Y/$)/(S0Y/$) over time
2. Does relative purchasing power parity hold?
a. Create another new column with (1+pY)/(1+p$)
b. Create a new column with (1+pY)/(1+p$) - (S1Y/$)/(S0Y/$)
c. Plot (1+pY)/(1+p$) against (S1Y/$)/(S0Y/$)
d. Calculate r-squared for (1+pY)/(1+p$) on (S1Y/$)/(S0Y/$)
Optional e. Plot (1+pY)/(1+p$) - (S1Y/$)/(S0Y/$) over time
3. Does interest rate parity hold?
a. Create another new column with (1+iY)/(1+i$)
b. Create a new column with (1+iY)/(1+i$) - (F1Y/$)/(S0Y/$)
c. Plot (1+iY)/(1+i$) against (F1Y/$)/(S0Y/$)
d. Calculate r-squared for (1+iY)/(1+i$) on (F1Y/$)/(S0Y/$)
Optional e. Plot (1+iY)/(1+i$) - (S1Y/$)/(S0Y/$) over time
4. Are real rates of interest constant across countries and over time?
a. To calculate a real rate for Japan, subtract Japanese CPI from
the 90-day Euroyen deposit rate. Do the same for the U.S.
b. In a new column, subtract the real U.S. rate from the real Japanese rate.
c. Plot the difference between real rates in the two countries over time.
d. Compare the mean and standard deviation of these two series
e. Compare real interest rates at different points in time
5. Is the real exchange rate constant?
a. Calculate percentage changes in the real exchange rate
% change in XtY/$ = [(StY/$)/(St-1Y/$)]*[(1+p$)/(1+pY)]
b. Set the beginning level of the real exchange rate at 100
(X0Y/$ = 100) and calculate XtY/$ = (Xt-1Y/$)*(% change in the real rate)
c. Plot the real exchange rate over time