rate relevant in explaining the demand for goods by the River (investment or money to bring players) is the real interest rate. The real interest rate, "says Llach" indicates how many goods will be sacrificed tomorrow to get a certain amount of goods today. Who borrows to consume or invest is concerned about how many goods will have to repay the loan in the sad hour of repayment. Then:
TDI EXPECTED BY RIVER = REAL RISK FREE RATE + RISK + DEPRECIATION COUNTRY EXPECTED IN THE REAL EXCHANGE RATE.
In essence, notice what captures the third element is the percentage difference that comes from making VARIATION IN THE NOMINAL EXCHANGE RATE EXPECTED less expected inflation. In a situation like this should be counted in the hope of these variables during the life of the loan period, but the important thing is that with high probability the third component will be negative: inflation is gaining at the rate of devaluation. Why? Understand a little what is happening. Assume for simplicity
that the National Bank offers a dollar loan to River so we removed the nominal depreciation expected in the rate component. Say River will have to repay U $ D 100 in interest and capital.
If the real exchange rate will be very low (because inflation is gaining against the dollar) at the end of the loan, Argentine goods will be very expensive in dollars and River will be forced to sell few assets measured in dollars ("players Falopa?) to honor its debt. Looking back: It took a loan worth 100 dollars, the exchange rate is fixed, but the prices of Argentina's economy as a whole rose (say 25%). Al end of the period, as the economy has become more expensive in dollars, will need fewer goods in pesos to pay its entire debt. The real value of debt with an unchanged nominal exchange rate (say one U.S. dollar = one peso) is lower by 25% inflation: 100/125 = 0.8
If instead the opposite happens (a devaluation of 30 % which exceeds the inflation rate of 25%) the real exchange rate increases. Again, at the end of the loan, Argentinos are very cheap goods measured in dollars. Therefore, in this situation will be forced to pay for many goods to fulfill the amount of dollars (or pesos with the corresponding adjustment) that requires the National Bank: 130/125 = 1.04
It is worth noting that we are leaving out all cases where devaluation exceeds the expected devaluation. That is, we are assuming that if the loan is realized in dollars, computed the expected depreciation in the rate charged by the bank is equal to the rate of devaluation actually occurs after the end of the period.
As the situation is most likely the former, we see that the expected real interest rate today would say that is negative (devalueta of 6, inflation of 25), and hence the demand for loans increases in all categories ("this will gives some idea of \u200b\u200bthe new shock of consumption durable goods?). If, indeed, ex post, it happens as expected, Daniel Alberto policy will have been correct (at least financially). Now, you have to buy players.
TDI EXPECTED BY RIVER = REAL RISK FREE RATE + RISK + DEPRECIATION COUNTRY EXPECTED IN THE REAL EXCHANGE RATE.
In essence, notice what captures the third element is the percentage difference that comes from making VARIATION IN THE NOMINAL EXCHANGE RATE EXPECTED less expected inflation. In a situation like this should be counted in the hope of these variables during the life of the loan period, but the important thing is that with high probability the third component will be negative: inflation is gaining at the rate of devaluation. Why? Understand a little what is happening. Assume for simplicity
that the National Bank offers a dollar loan to River so we removed the nominal depreciation expected in the rate component. Say River will have to repay U $ D 100 in interest and capital.
If the real exchange rate will be very low (because inflation is gaining against the dollar) at the end of the loan, Argentine goods will be very expensive in dollars and River will be forced to sell few assets measured in dollars ("players Falopa?) to honor its debt. Looking back: It took a loan worth 100 dollars, the exchange rate is fixed, but the prices of Argentina's economy as a whole rose (say 25%). Al end of the period, as the economy has become more expensive in dollars, will need fewer goods in pesos to pay its entire debt. The real value of debt with an unchanged nominal exchange rate (say one U.S. dollar = one peso) is lower by 25% inflation: 100/125 = 0.8
If instead the opposite happens (a devaluation of 30 % which exceeds the inflation rate of 25%) the real exchange rate increases. Again, at the end of the loan, Argentinos are very cheap goods measured in dollars. Therefore, in this situation will be forced to pay for many goods to fulfill the amount of dollars (or pesos with the corresponding adjustment) that requires the National Bank: 130/125 = 1.04
It is worth noting that we are leaving out all cases where devaluation exceeds the expected devaluation. That is, we are assuming that if the loan is realized in dollars, computed the expected depreciation in the rate charged by the bank is equal to the rate of devaluation actually occurs after the end of the period.
As the situation is most likely the former, we see that the expected real interest rate today would say that is negative (devalueta of 6, inflation of 25), and hence the demand for loans increases in all categories ("this will gives some idea of \u200b\u200bthe new shock of consumption durable goods?). If, indeed, ex post, it happens as expected, Daniel Alberto policy will have been correct (at least financially). Now, you have to buy players.
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