Miss Ferenczi in “Gryphon” by Charles Baxter Essay

In the short story Gryphon, Charles Baxter creates a far-from-perfect character, the substitute teacher Miss Ferenczi, who lives in a fantasy world without boundaries and tiresome limits. Her arrival has a great influence on the whole rural Five Oaks community. Miss Ferenczi’s appearance and behaviors, portrayed through her student’s eyes, place her as a symbol of reformation and immerses her students into a rich and fascinating world. Charles Baxter introduces Miss Ferenczi into the fourth grade class of Five Oaks community in a mysterious way. Unlike other boring normal substitute teachers the children are used to, she comes in with her purple purse and checkerboard lunchbox signaling the beginning of an unusual experience. As she walks to the blackboard, picking up pieces of white and green chalk, she draws a large oak tree on the left side of the blackboard saying the class needs this tree in it. This first scene alone has already created a mystic fog about the new teacher’s behavior and personality. She then tells the class about her royal Hungarian ancestor, which adds more to the strange atmosphere. She was proud of her mother being a famous pianist who succeeded her first concert in London for â€Å"crowned heads.† The way she nostalgically looks up to the ceiling, makes the students follow her eyes but see nothing except for ceiling tiles. Her actions are far more than what fourth graders can possibly understand. This is the start of strange events following in the plot. However the most remarkable detail is her physical appearance: â€Å"her face had two prominent lines, descending vertically from the sides of her mouth to her chin.† This abnormal feature is foreshadowing for what happens later on and also a hint at an unreal, numinous personality. The two lines remind Tommy, the little narrator, of Pinocchio. The comparison of Miss Ferenczi to this character is foretelling of her later unreliability of her words, since, like Pinocchio, her nose is also prone to extend. The students later on question on the truthfulness of Miss Ferenczi’s lessons. Moreover, Pinocchio is a product of imagination, as Miss Ferenczi living in her unreal world. Miss Ferenczi is also well portrayed through her lectures. The first incident is when John Wazny is doing the multiplication table. As another boy pointed out Wazny said six times eleven is sixty eight, and the right answer should  be sixty six. Miss Ferenczi on the other hand tells them the answer of sixty eight is also right, â€Å"when I am in the room.† She encourages the children to form their own perspective of life and tries to make them break out of the rules and norms other adults created. Mr. Hibler, as well as any other teacher would tell the kid that math, as a science, is facts which cannot be bent. In contrast Miss Ferenczi simply states â€Å"It’s more interesting that way† to explain her odd answer. She exposed her class to â€Å"substitute facts,† things perceived out of ordinary and accepted by the minority or even just an individual. Being with the majority does not mean it is right; there is always another solution for every happening in the world. The utmost influential image is the gryphon when Miss Ferenczi talks about the Egyptians. The magical creature is half lion half bird, which represents Miss Ferenczi herself in this story. The things she tells the students are half truth, and half myth or even unreal. She tells them about the plant that eats meat, which is a fact. She mentioned the sea creatures that are as thin as pancakes and cannot be studied as they will explode in the normal pressure air, which could be the truth. However there is other information which remains to be doubtful, such as Beethoven pretending to be deaf, the Hope diamond’s curse etc. Some are even personal views or beliefs, for instance the comment on the genders and planets control over behaviors. The point is gryphon makes people imagine and long for the other side of the dream world, and broaden their mind, like how Miss Ferenczi makes the children start to form their own thinking. In addition, Miss Ferenczi is unique in her behaviors and reaction with the class. She seems to be strict at the first moment when she first gathers the boy to settle for lecture. However she reveals her sweet side when choosing to have lunch with the kids. She claims other teachers seem to lack ideas, which means they are boring and all the same. She gently warns the children about choosing their food and she tells the stories to them because she knows they like â€Å"these secrets†. Miss Ferenczi’s appearance, throughout the three times she teaches in class, gradually changes as well. She first had an elegant chignon, and then on the second day her clothes were of bright green blouse and pink scarf with her hair done into a pigtail held by red rubber bands. Finally the last day she goes to the class, her hair â€Å"hung  straight down and seemed hardly to have been combed.† The way her appearance changes shows as she goes on the more she gets away from the reality and the ordinary. The climax of the story is when Miss Ferenczi read the fate for the students through her Tarot cards. She reads the cards for several children, and when it comes to Wayne Razmer, the little boy gets a Death card. She tells him the card means he will soon face his fate, but as she mentions earlier, death is not the end; it is just a new beginning. Her motivation on telling to boy about his fate is not to scare him, but to tell him not to fear of what will come on his way. However this action is to the extreme and inappropriate with elementary children, despite her good intentions. At the end of the story Miss Ferenczi has gone too far from the reality world, where the boundaries trap her dream. She lives in a different world, of Gryphon, Sphinx and all beautiful miraculous creatures. Perhaps she does not belong to Five Oaks, where people like Tommy’s mom, Mr. Hibler and others cannot accept such imaginative and individualistic thinking and ideas. Miss Ferenczi is fated to leave the school, as the society not yet realizes the importance of her innovative dreams. As Miss Ferenzci said to the children, â€Å"angels live under those clouds† and they are among us. Angels are everyone inside these children, if they allow their imagination to fly; they will soar up and reach the peak of understanding of themselves and the world. Though she may not be perfect, Miss Ferenczi symbolizes change and creativity that human beings should not put limits on. Dreams and beliefs are the only resources that we never lack, and the teacher in Gryphon changes her fourth grade students, help them wonder and reach out to new concepts. Works Cited Baxter, Charles. Gryphon.1985. Rpt. in Compact Literature ReadingReacting Writing. By Kirszner and Mandell. 6th ed. 2007. â€Å"Gryphon: Often Asked Questions.† Rev. of Gryphon, by Charles Baxter. CharlesBaxter. 3 June 2009 .

Teenagers Represented In The Media

Teenagers used to be the forgotten group in society. The ones who are stuck between being â€Å"cute kids† and â€Å"responsible adults.† But all that's been changing over the last twenty years or so, as the media realizes that teens are slowly getting a voice in society, but are these changes good or bad? The media represents teenagers in a very conventional way, stereotyped by their appearance, sex, and personality. Different varieties of media are meant to do different things. Some of the media's many roles are to display the truth, make the viewer aware and to entertain. Most of the media presents an inaccurate and negative portrayal of adolescents today according to their appearance, sex, personality and age, among other things. Most teenagers in the media are represented as attractive, confident and white, which may make teenagers feel pressurised to fit in with the medias representation of them and so if they don't fit these categories making them uncomfortable with their own bodies. I think the media should have a wider variety of races, looks and personalities to show teenagers they don't have to have fit in with the typical image of them as shown in the media. The media highlights the exciting events in teenagers lives, e.g dancing at parties, getting drunk, spending money and generally having a good time, but they don't always show the more depressing parts of teenagers lives such as bullying, exams, insecurities etc, which seems more important There are many TV programmes today that focus on wealthy, glamorous lifestyles of teenagers that come form extremely privileged backgrounds, many people enjoy these programmes as it gives them a chance to escape from the reality of their own lives and see it from other peoples. Although some other programmes look at the more realistic lifestyles, where teenagers have to work hard and don't just have everything handed to them on a plate, many people watch these as they can relate to them and understand where characters are coming from. Although in all these lifestyles the teenage characters do go through many dramatic, emotional experiences and events. A lot of the media shows teenagers partying every night, always out and getting up to mischief e.g. taking drugs, having fights etc. In Skins, a teenage drama, a character called Effy sneaks out her house in the middle of the night, burns a bus, goes out to a deserted warehouse, where she takes various drugs with boys and finally ends up in a party at a random person's house where she collapse from a drug overdose. Later her brother finds her, she is then rushed to hospital and ends up moving school; this all happens in the space of a few days. In reality most teenagers' lives are a lot more boring, dull and uneventful, for example they generally spend most of their time studying, using the Internet at home and watching TV etc. Often their characters are exaggerated as well as events and situations. In a lot of teenage dramas the characters are unrealistic for example in the TV series Eastenders there is a teenage boy, Stephen, who is evil and manipulative, he turns his own sister against their family, while everyone thinks he is kind and good, in real life teenagers are not like this, they aren't as controlling or manipulative. Although teenagers are represented positively in many parts of the media, programmes such as the OC show characters like Marissa and Ryan acting kindly and maturely e.g. when Marissa sees a man being mugged, she comes to help him and calls the police this shows she is caring and responsible, which is a positive image of teenagers in the media. In conclusion Teenagers in the media are shown in lots of different ways, often as being a problem to society e.g. controlling, rude and disrespectful, this is shown in soaps, dramas, movies and news, it gives out a very negative image on teenagers, which isn't always fair. Teenagers can be represented positively, helping the community and being polite and social although this is not usually the case. Mainly teenagers are shown in a negative way and their characters and dilemmas are not realistic.

Personal space Essay

Most social situations North Americans require a comfort zone of six to eight square feet per person, and any violation of that buffer can trigger a reaction (Bowen). â€Å"People use avoidance responses,† says Robert Sommer, a psychologist at the University of California-Davis and author of the book Personal Space (qtd. in Bowen). But where does the standard of personal space come from? According to Sommer, â€Å"a comfort distance for conversation varies from culture to culture.† Because Mediterranean and Asian countries are more densely populated, their personal space zones are much closer to the body than those of North Americans and Northern Europeans (qtd. in Bowen). The westerns are certainly planning on keeping this standard in the future. In fact, the world’s population is increasing at an incredible rate. Even the country offers its citizens plenty of spaces everywhere; they have to learn to make compromises on their personal space not only to accept the inevitable reality but also for the benefit of this compromise. First of all, urban Americans should make compromises on personal space when they are using public transportations. The New York City subway system is a really great representative example of personal space; the total number of urban citizens is more than 18 million, thus making the subway system extremely crowded every day. But even during the rush hours, the passengers are still careful about their distance with the others. If one person has a minor physical contact with someone and doesn’t express the apology, the other person will raise their voice instantly and say â€Å"excuse me† and certainly feels offended. This is totally unnecessary, especially during the rush hours, because some people might be late for work or school already, and someone might be thinking about today’s schedule. The rest of them are doing things that indeed catch their attention. Under such circumstances, it’s highly possible for passengers to have minor physical contact with others out of negligence they don’t notice. On the other hand, there is Shanghai, the second largest city in China with more than 20 million residents and most of them use the subway for daily transportation. It’s even more crowded compared to the New York City subway. So close to each other with their shoulders and backs passengers may nudge 2 or 3 persons at the same time, and they have been totally adapted to this situation without any discomfort. The Tokyo subway  system passengers have even less personal space during the rush hours. The metro staff will push the passengers back so that more people will have the opportunity to get in the train in the morning. What are the passengers’ reactions? They don’t feel offended at all. They are actually grateful because all of them can get to work on time, and their personal sacrifice is helping many people. Their joint efforts make the subway system much more efficient and indeed prevent lots of unpleasant arguments. â€Å"When they’re moving, they tend to keep a distance of three or four steps so as not to violate each other’s personal space.† said Larry Gould, director of operations analysis at New York City Transit (qtd. in Gardy). But the sheer density of the population is giving the Chinese a very different sense of personal space (Toy, 2). â€Å"Personal spaces overlap,† said Stuart Strother, an economist who has lived in China and who wrote a travel guide, â€Å"Living Abroad in China†. â€Å"It’s not that you don’t have any personal space, but I may have to share your space,† he said. Perhaps as a consequence, Strother said, pointing at and touching people, even total strangers, is not considered rude (Toy). There’s also another interesting phenomenon. You will never see two strangers sitting together in the New York City subway if there’s empty space somewhere else. The definition for â€Å"empty† means nobody is sitting next to you, and there’s at least one seat separating you from your surroundings. Most of the time, even during the rush hours, passengers prefer to stand rather than take the single seat between two passengers. Based on Robert Sommer’s theory, â€Å"The violation of personal space increases tension levels enormously (qtd. in Bowen)†. In other words, urban Americans prefer to sacrifice many things in order to sustain their high standard of personal space. But with the expansion of population, Americans eventually have to make compromises on personal space. So why not prepare to adjust the situation ahead of time? There’re also many benefits if they’re willing to do so. The most direct benefit is to increase the capacity of the train; more passengers can get in the train if most of them are willing to have less personal space. On top of that, more empty seats will be occupied if they sit close to each other. The amounts of seats are designed for a reason; it’s common to see 3 people occupy 4 or more seats. They sit apart simply because they want to have more personal space. Nothing bad will happen if  Americans make compromises on personal space. Urban Americans don’t need to create those invisible walls to protect themselves. They probably waste a great opportunity to make new friends sitting away from each other in the subway. Society will be filled with harmony and peace if people are not so suspicious and stop creating those invisible walls subconsciously. Lots of Americans are having a hard time adjusting to Chinese culture during their visit in Chinese cities. Some locals may come to them in order to take photos with the foreigners. Other locals are probably looking at the foreigners out of curiosity. Those actions are really common in China but the Americans are quite sensitive to those actions and sometimes feel offended. Their invisible walls are necessary to isolate them but indeed increase the tension levels. Americans’ perceptions and standards of personal space are definitely hard to change, but if they do, it always comes with a greater good. The United States is currently the No.1 country in the world, which receives millions of immigrants every year. By receiving those immigrants, United States not only receives the knowledge but also accepts their different cultural standards. Urban Americans can neither apply all the American standards to new immigrants nor expect them to adopt the entire standards by themselves. Personal space is only the tip of the iceberg, but it’s fairly important to live in the big cultural melting pot of New York. Subway passengers are highly diversified, and there’re probably people from 50 different countries taking the same train at the same time. According to Shuhan Wang, the executive director for Chinese language initiatives at the Asia Society, there’s an old Chinese saying â€Å"you treat other people’s elderly as if they’re your own, and you treat other people’s children as if they’re your own∙∙∙ So in a way, everybody in society is extended family† (qtd. in Toy). This is a good concept that urban Americans should take a look at to make compromises. By lowering the standard of personal space, it will be easier for foreign immigrants to be part of the society, and lower standards are always easier to be adopted gradually. The standards of personal space can also be interpreted through sociological perspective. According to Robert Pepper, a sociology professor at New York Institute of Technology, conflict theory can be used to explain the standards of personal space because people are competing for scarce resources; every single passenger would like to  have some extra space in the subway especially during the rush hour. He used the term â€Å"ethnocentrism† to suggest that Americans to make compromises on personal space. He believes Americans should not place their own cultural group above the rest. The standards of personal space are definitely different based on the culture, and the Americans should respect all customs and religions. â€Å"Chinese society emphasizes a collective mentality over an individualistic one.† said Stuart Strother (qtd. in Toy). But the American culture is exactly the opposite, thus making it even harder for urban Americans to accept. Having the idea of individualism, Americans are rewarded for behaving independently, making their own plans, and working toward achieving their personal goals. Under such circumstance, individuals are hired and promoted largely based on individual achievement and qualifications (â€Å"Culture†). And the Americans expand this idea of individualism into all areas; they want to be unique, to be easily distinguished from the crowd, and a high standard of personal space is definitely necessary. Chinese people are different, they emphasize the idea of the group, and everyone in the group shares things equally, so no one is necessarily better than the rest. People will stay together to achieve the group goal. No one wants to be unique because if you are unique that means you are isolated. The overall impact from high population density and idea of big groups are helping the Chinese adjust the lower standard of personal space in the long run. If Americans could learn some of the concepts, it will be much easier for them to make personal sacrifices in exchange for the greater good of the society. But some people may argue that lack of personal space can indicate people’s lack of manners and this is not right. In Lee, Patrick P’s article â€Å"Rush Hour,† he introduced his own life experience in Hong Kong which at the time was still a British colony. Hong Kong adopted the language, social order, peoples’ perceptions of things and especially manners. They are taught with the British gentlemen’s style, but on the other hand, there’s no need to say â€Å"excuse me† in the subway, or any doorway. The locals aren’t being rude when they invade your personal space. They simply need to go everywhere, nowhere, fast. In tiny and overcrowded Hong Kong, the concept of â€Å"personal space† is a luxury which one can’t afford and probably doesn’t exist (Lee, 2). This kind of situation will eventually happen in big US cities. If they’re making the compromise now, it  can be beneficial in the long run. The United States doesn’t have mandatory birth control which will inevitably make the population expansion even faster, and as a result the personal space will shrink. So to be prepared ahead of time is always a good thing. The younger generation will have different mind sets in the future in order to adjust the situation. Driven by individualism, urban Americans are treating their personal space as one of their birth rights. It’s complicated even verbally to ask them to make compromises on their personal space. But the whole world population just passed 7 billion 1 month ago; this inevitable reality should give urban Americans a wakeup call. If they choose to live in the big cities, they’re going to have to face the overcrowded society. They’re going to feel disappointed because their old standards cannot apply anymore. So, make the changes of mind from now and it will eventually give them greater benefits. They can have a good mood to start the new day with the crowded subway, if they’re willing to make minor sacrifice on personal space. They’re still very gentle persons even they sit next to someone because the society accept the different mind and adapt to the situation of fast expanded population and less personal space. Foreigners won’t feel the indivisible walls anymore because urban Americans don’t need them anymore. The whole society could be filled with harmony and urban Americans could be living more like a big family.

Leadership, Teambuilding, and Communication Essay - 3

Leadership, Teambuilding, and Communication - Essay Example The company’s profits mainly come from advertisement services. Google inc. was founded by Sergey Brin and Lary Page of the University of Stanford in mid 1990s before going public in 1998 and headquartered in Mountain View, California. The company has witnessed tremendous growth in the past decade and is currently running over one million data service centers worldwide and processing numerous search requests. All the achievements certainly came as a result of the leadership characteristics and style adopted the company leaders (Duthel, 2008). Therefore, there are several leadership traits that I would expect of the leaders of Google Inc. Firstly, I would prefer them to be democratic. A democratic leader in this regard means a leader who allows participation and consensus in decision-making. Through democratic leadership style, the company would be able to engage it employees on matters relating to the company which will certainly be beneficial in propelling the company to prosperity. The benefit of engaging employees in matters relating to the company is because employees of Google are certainly the ones who deal directly with the company’s customers and as such understands their needs and where they want improvements effected. Democratic leaders will, therefore, benefit from the consensus building as far as running of the organization is concerned (Adeniyi, 2007). Secondly, the leader needs to be one with a vision. In this regard, the leaders of Google Inc. should be one who is confident and belief of what he or she is doing, with a clear vision of what he or she wants the company to go. This characteristic is important because such a leader would be able to inspire the employees towards the attainment of such a vision for the prosperity of the organization. Truly, a leader without a clear vision cannot inspire people to follow his or her commands (Adeniyi, 2007). The leader should also be one who inspires his followers rather than command. Research

Annual advertising and public relations programme Essay

Annual advertising and public relations programme - Essay Example If we talk about the major benefits of developing and executing an advertising campaign for a company, we come to know that there are various benefits that a company can achieve by implementing a well-structured and strategic advertising plan related to its products and services. Mckenna (1991) states, â€Å"When you own a market, you lead the market†. Some of the benefits include achievement of market dominance, communicating a change in the product line, increase in the market share, competitive edge, market penetration, seasonal promotions, and increased awareness among the people about the products and services being provided by the company. The name of the company is Car World and it is a well-established company belonging to the automobile industry of Oman. Car World deals with manufacturing and distribution of local cars. Some types of the vehicles, which the company manufactures, include mini trucks, family vans, and trucks. American Motor Corporation (AMC), which is an American automobile company, carries out some of the key manufacturing processes of the Car World’s cars. The product for which I am going to develop the advertising plan is Salome Family Van. Salome van is a new product manufactured by the Car World in collaboration with AMC. Salome van is a 7-seater vehicle, which is an economical car for the large families. People should buy this car because of its cost-effective price, beautiful shape, and capacity to hold a large number of people at a time. This car consumes very less amount of fuel as compared to other competitors such as Raxel Motors and Raymon Cars. The market share of the cars manufactured by the Car World is 35% in 1300cc engines, which is a good market share in the automobile industry of Oman. Kayne (n.d.) states, â€Å"Marketing strategies differ depending on the product, target market and

The Aim of Business Policy and Strategy Essay Example | Topics and Well Written Essays - 500 words - 1

The Aim of Business Policy and Strategy - Essay Example For a company to offer quality services, it ought to lay down a framework that is going to make the company more proactive in decisions making and ensure good bright future of the firm. The company strategic vision is to offer exemplary high-quality transport services at affordable prices. For an enterprise to be functional, it ought to develop ways that are going to ensure that it is guaranteed to win the competition in services delivery. Enterprises have to develop mechanisms that are going to ensure it responds to dynamic eternal changes amicably for it to pursue its mission. The corporate strategy of a company ought to spell out the goals that are major all its priorities, the plan of events and the course of action throughout a certain period. Many transport companies tend to focus on offering only one service; transport of goods and services. A company corporate strategy ought to be based on the design, by majorly focusing on the young and beginners for services. Therefore, the growth strategy of a company should focus on diversifying its services to incorporate postally and care hire services intended to meet the diverse needs of people. The major hitches that any enterprise business will tend to face throughout its operations are competition, resources and the necessary capabilities. The corporate world is one of the most volatile areas of the economy that are had to operate without skill and, therefore, requires deliberate courses of actions. However, such challenges can be overcome by developing viable strategic plans that are going to spell out al l the courses of action to overcome them.

Hybrid Cars Research Paper Example | Topics and Well Written Essays - 1500 words

Hybrid Cars - Research Paper Example Global warming has taken the better part of environmentalists. Anderson, in his publication, argues that the introduction of hybrid automobiles had a weighty significance to the environment (Anderson, & Anderson, 2010, p. 37). The first advantage attached to the introduction of this technology is that the automobiles pose less threat to global warming due to their low carbon dioxide emissions. This helps in conserving the future and reliable environment. Researchers suggest that the amount of carbon dioxide emitted by automobiles is proportional to the fuel energy they consume. Therefore, hybrid vehicles with low fuel consumption emit low amounts of the green house gases, thus, reducing threat to the ozone layer. For instance, the Toyota Prius hybrid from the United States reduces tailpipe emissions by up to 90% and green house gas emissions by around 50% (Hilgenkamp, 2005, p. 122). Scholarly research clearly depicts that the hybrid automobiles burn far less gas per mile compared to that of convectional cars. In addition, a number of harmful smog pollutants emitted by the hybrid cars are half compared to the traditional gasoline powered automobiles. This, thus, makes the hybrid automobiles more efficient to use. Due to the strong urge of improving mileage especially in the United States, they have encouraged people to use hybrid cars. This has resulted in the production of more and luxurious automobiles, which rely on low amounts of fuel.Low fuel consumption motivates individuals and states to poses automobiles. Petite MPG (miles per gallon) improvements on incompetent automobiles saves a large amount of fuel over a given remoteness of driving since the greater the MPG, the lower the amount of carbon dioxide produced when traveling a fixed number of miles. A clear example is portrayed by the Nissan Altima hybrid, which gets 35 mpg in the city and 23 mpg on the highway whereas the convectional car gets 33 mpg in the city and 32 mpg on the highway. Ultimately, th e MPG of a hybrid car is higher due to consumption of low fuel amounts as compared to the MPG of a convectional car, which is low due to high fuel consumption resulting to subsequent high carbon dioxide emissions (Stellet et. Al, 2011, p. 3). Arguably, hybrid automobiles consume less amounts of fuel thus reducing the need of foreign oil. The technology being outdated by the introduction of hybrid automobiles is known for high fuel consumption. In fact, statistic collected by U.S. Energy Information Administration (EIA)

Marketing Essay Example | Topics and Well Written Essays - 750 words - 50

Marketing - Essay Example The business policy adopted by the Zip Car is a unique one and the key thing is that they are constantly updating it with the time. Offering low rental, better availability, using high technology to attract people specially the young generation is one the key behind their success over the last 8 years. The company is now the leader of the car rental market in the USA and focusing more to boost their profitability by adopting more advanced business strategies according to the culture and structure and requirement of the society. Zip car is one of the well-known car services in the western world. The process was initiated way back taking into mind the need of the customers in and around the urban areas. In every country people who belong to higher class can afford a number of cars but the number of people in that group is very little. Majority of the people cannot afford a car but in most cases they would love to avail the service. Zip car cash onto this option and started providing car to the customer with nominal price, greater and easy availability, taking environmental pollution under control but provide easy and affordable solution to the people belonging to middle class. The company is now the leading car share company in the world providing rental car to the people and having a customer base of over 700,000 passionate customers. The bottom-line of their offering is Wheels when you want the’. A simple registration process, a comparatively lower rental, variety of choice for different occasion an d different purpose –all these making them the leading player in the car rental service. The business was started 8 years back and profit was increasing every time. The business was started focusing urban life as the need is highest over there. Soon they widen their operation and now they started to focus on environmental policy, tracking more corporate client as well to get more strong hold

B2 Managing Organisational Change and Development Essay - 1

B2 Managing Organisational Change and Development - Essay Example This chain of hotels is one of the largest on a global level, specifically because of the infrastructure that it has created. However, projects for expansion are required to take new initiatives for the continuous expansion within the industry. Hilton Hotels is one of the largest corporations in accommodations and has built their company as being one of the most innovative hotel chains. They currently have hotels in six continents with over 530 hotels and resorts in over 76 countries. The standards that have been set by the hotel are based on providing innovative products, amenities and services to guests while considering the trends that are currently a part of the industry. For instance, many of the hotels are focused on providing green seals for the environment as one of the latest trends in the industry. The different hotels are built as franchise opportunities with the Hilton as the overall brand name that is within the industry. The reservation system is built from a multi – level option which allows different consumers to connect to hotels first by locality then by the types of amenities that they desire to have. The overall focus of the different concepts of the hotels is based on a spirit of hospitality and service while providing rooms for both leisure and business options. The hotel has also built a reputation from philanthropic activities taking place around the world (Hilton, www.hilton.com, 2010). The current status of the hotel industry, specifically with competition of the Hilton, is one that is becoming redefined through the current market. The recession in the United States from the year of 2007 created lower demands for the hotel while many consumers and businesses began to focus on budget instead of style. The expansion of the Hilton into other regions of the world carries the same concept, which includes high

Internal Audit Function and Fraud Detection in Government Essay Example for Free

Internal Audit Function and Fraud Detection in Government Essay CHAPTER ONE 1. 0Introduction This chapter will cover the background of the study, the statement of the problem, the purpose of the study, the objectives, the research questions, and the scope, the significance of the study and the structure of the report. 1. 1Background of the Study According to Hector Perela, (2009), Internal auditing function with other intervention mechanisms like financial reporting and external audit to helps maintain cost-efficient contracting between owners and managers. It is designed by government agencies to add value and improve organizational performance. It helps organizations accomplish their objectives by bringing a systematic, disciplined approaches to evaluate and improve the effectiveness of risk management, control and governance processes. † Internal audit helps organizations to ensure that financial and other records are reliable and complete. As well as ensuring that management adheres to policies and procedures for orderly and efficient conduct of the business, proper recording and safeguarding of assets and resources. The purpose of internal audit as far as the organization is concerned is to get accounting errors corrected and control weaknesses eliminated. The most testing time for the internal auditor is the report he/she writes to achieve this end. No precise legal definition of fraud exists; many of the offences referred to as fraud are covered by the Theft Acts of 1968 and 1978. Generally, the term is used to describe such acts as deception, bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation, concealment of material facts and collusion. For practical purposes fraud may be defined as the use of deception with the intention of obtaining an advantage, avoiding an obligation or causing loss to another part. Internal Audit, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK) On one hand, fraud detection in government agencies involves employees or managers of the victim organization (commercial angles news letters 2001), the most effective tools for fraud detection are internal audit review, specific investigation by management, employee notification, and accidental discovery. Fraud detection helps Management to address its responsibility through development of an appropriate design of the system of internal control and the effective operation of that system. Numerous fraud prevention and detection techniques are now utilized to reduce the direct and indirect costs associated with all forms of fraud. These various techniques include but are not limited to: fraud policies, telephone hot lines, employee reference checks, fraud vulnerability reviews, vendor contract reviews and sanctions, analytical reviews , password protection, firewalls, digital analysis and other forms of software technology, and discovery sampling (Thomas and Gibson, 2003). Government departments implements the ideas and decisions of executive government in a particular area of governance. Each department is led by a minister in charge or commissioner, and the main work of the department is determined by legislation. Despite the internal audit function, many government agencies fail to detect fraud for example loss of huge monies in NAADS. The National Agricultural Advisory Services (NAADS) is a Ugandan government agency created in 2001 to improve rural livelihoods by increasing agricultural productivity and profitability.

Exchange Rates and Interest Rates in Pakistan Analysis

Exchange Rates and Interest Rates in Pakistan Analysis Abstract This paper endeavors the relationship and the positive effect between exchange rates and interest rates in Pakistan by utilizing the foreign exchange market and current scenario of increasing interest rates because of increasing exchange rates to represent the economic position of Pakistan. The data by the researcher is all on daily basis for the above variables from the period of September 2001 to May 2008 for exchange rates, while for interest rates (6 month KIBOR) from the period of September 2001 to May 2008. The researcher implement regression model to test the effect of exchange rates progression on interest rates. So in this result, there is the issue of auto correlation exists and it shows the serial correlation between these variables. The issue should be resolved by taking time and KIBOR lag values as the dumm dependent variables. The study concludes on this way that there is the negative relationship between exchange rates and interest rates (KIBOR) in Pakistan and there i s the impact of time and KIBOR on KIBOR.. It identifies that when exchange rates increases, there is decreasing in interest rates (KIBOR). This results and relationship is consistent as predicted by Meese and Rogoff (1988). INTRODUCTION Every country has its own financial markets and it is the back bone of a countrys economy. The financial markets is divided in parts like foreign exchange market, stock market, money market, bond market etc. In this study, the researcher is focuses on the foreign exchange market, which is commonly known as Forex. It is the largest and most prolific part of financial market and defining the balancing of countrys economy, because every particular day, there are approximately one trillion amount of foreign exchange takes place in the countries around the world. The actual mechanism of the foreign exchange, that it is work as the main driving force for an any countys economy in the world. Therefore, any country in the world should challenge their currency in the global economic markets. In the exchange markets for all the countries, home country currencies trade with other foreign country currencies. The foreign exchange market system is needed for every developed and under developed cou ntry; this system known as currency in exchange determination. For the determination of the value of a currencys exchange rate, there are two main types of system is used, one is floating exchange rates system and the other is fixed exchange rates system. The intervention of government officials authorities in the foreign exchange market is to influence the exchange rate fluctuation as a worldwide phenomenon. The authorities intervene maintaining the objective to orderly market conditions that ultimately help to achieve the overall macroeconomic goals. However, the exchange rate has playing an important role in terms of the flexibility in macroeconomic framework to deal with changes in the external terms of trade, but the monetary policy also aims the national objectives of economic diversification and to support export competitiveness. The ineffective monetary policy under fixed exchange rates as compared to flexible exchange rates, but fiscal policy under both fixed and flexible exchange rates remains weaker of achieving the level of output. (R.A. Mundell, 1968). The level of currency risk changes, it has no negligible impact on the rates of change of exchange rates and on relatives rates of interest between currencies. (Clas Whilborg, 1982). The risk premium of the currency is the important factor relative to floating exchange rate system, but movements in the exchange rate are dominated by the non speculative activity and it has the adverse effect on world economy. (John bilson, 1985). The true statement that in many cases the sign of the estimated exchange rate-interest rate differential relationship is consistent with the possible predominance of financial market disturbance (R. Meese K. Rogoff, 1988). The consequences changes in the nominal interest rate reflect changes in the tightness of monetary policy. T he higher the interest rate in the country attracts the capital inflow, which causes the domestic currency appreciates, so this gets the relationship could be negative between the exchange rate and nominal interest rate differentials. (J.A. Frankel, 1979). The assets are dominated and exchange risks interest reflects the interest rate parity when different currencies affect political risk and thats why assets are issued in different currencies. Thus the interest differentials to the political risk of future capital control must be distinguished due to the effective tax that controls the place in interest earnings. (M.P. Dooley P. Isard, 1980). The concept of political risk is that the probability authority of the state will be interposed between investors in one country and investment opportunities in other countries that is the probability that controls the imposed on capital flows. (R.Z. Aliber, 1973). If price levels and exchange rate are significantly volatile and cannot be cos tly hedged, are adversely affected in the real value of the domestic currency. There is some evidence that exchange rate fluctuations are a priced factor in cross sections of stock return converted into a common currency. (W. Bailey P. Chung, 1995). In the perfect mobility the exchange rate movements and an adjustment of goods market is relative to asset market and consistent expectations. The extends that output responds to a monetary expansion in the short run, this acts as an effect on exchange depreciation which lead to an increase in interest rates. (Rudiger Dornbusch, 1976). The foreign exchange gain or loss is made in the course of covering; consider being capital assets, so this gain or loss treated on capital account. This shows the highly sensitive interest dynamics with exchange rates. (M.D. Levi, 1977). The variability of industrial production output will be higher in the regime of fixed exchange rates instead of regime of flexible exchange rates. (Flood Hodrick, 1986) . The effect of consumption goods purchases by the government is not the private utility, but per capita real government expenditure are the composite of individual consumption of goods. So notice that the demand of money its depends on consumption of goods rather than income and that is the important distinction of closed economies.(Obstfeld Rogoff, 1995). The fixed and floating exchange rates depend on higher welfare yield and on the nature of sticky prices, so the risk would be shared and there are some opportunities to aware. The evidence, which should give opportunities about price setting and risk sharing are not refined and not to make the definite conclusions for the optimal regime of the exchange rate of that country. There are three types of ways which gives stickiness in prices, the prices which would set by the firms in their own currencies, the firms would set the prices for consumers currencies, or firms would set the prices in the currencies of producers. (Charles En gel, 2001). When the exchange rates changes, it may cause to appear the changes in relative prices and make to generate additional uncertainty for equilibrium in markets. However, there is also defining that the changes in terms of trade would play the larger role of changes in the exchange rates which affect the variability of exchange rates. (A.C. Stockman, 1980). This study explores to investigate the determinants of exchange rates in developing country such as Pakistan. The framework of this study is concern to be conceptual and theoretical and is to set up the ground of unidirectional causality from exchange rates to economy. In principal, it determines the exchange rates relationship with interest rates so it will spurs the determinants in Pakistan with related to the economy. This view implies that the choice of an exchange rates regime be a relatively simple, if countries were faced to intervene regularly in the foreign exchange market to stabilize, therefore the monetary authorities intervene with the objective of maintaining orderly market conditions, which ultimately help to achieve the overall macroeconomic goals. The discretionary nature of the existing monetary policy in Pakistan is inflation, and it is targeting to hit on the Pakistani economy by focusing attention on the monetary policy. So the government of Pakistan is to make t heir monetary policy more transparent for achieving their explicit goal, and decreasing the inflation. Therefore, it is increasing the publics understanding of the central banks strategy to deliver the target, so the State Bank of Pakistan will help to provide an anchor for inflation expectations in the economy. The State Bank of Pakistan (SBP) has accorded a high priority to achieving a low rate of inflation, and the monetary policy also aims to support the objectives of the national country of Pakistan to meet their diversified economy and competitiveness in the export from other countries of the world. This study will also helpful to the SBP to developed their awareness of the relationship of exchange rates with KIBOR, so SBP may observed the controversy of their ups and downs fluctuations so it may controlled significantly. The bank treasury department should get the help because, they have continuously meet the exchange rates and make transactions of the countrys currency with others country currencies, so it should make them identify that if exchange rates increases or decreases it should not make effect on interest rates but their should be some inverse effect in nature. This effect should create controversy in the country economy so the central bank should make some authorized decisi on to controlled the exchange rates and interest rates The thesis is structures as follows. Chapter II provides literature review. Chapter III defines the outline of variables, their sample size, data sources and its formatting and the model. Chapter IV explains our findings and results. Finally Chapter V reports conclusion Chapter II Literature Review: This study relates to examine the relationship and effect between exchange rates with interest rates. Numbers of studies have done by the researchers, Robert A. Mundell, (1961), Bela Balassa (1964), Robert Z. Aliber, (1973), Rudiger Dornbusch, (1976), Richard A. Meese Kenneth Rogoff (1982), H.M.S Gerlach (1988), to investigate the determinants of exchange rates have applied in the world exchange rates market and help for different countries in their market development and economic growth. Researchers attempted to exemplify whether, how and to what extent the determinants of exchange rates market can contribute to the process of economic growth. Purchasing Power Parity Theory: The purchasing power parity theory doctrine means different things to different people. It has two versions of this theory that can be called the absolute and the relative interpretation. The first version of purchasing power theory calculated as a ratio of consumer goods prices for any country would tend to the equilibrium rates of exchange. In the second version of relative interpretation the rate of exchange rate would be determined between two countries and quoted with general levels of prices of two countries. It amend the international trade theory which would be the part of PPP, in which introducing the non-traded goods (services), but the advantage is greater in regards of traded goods than non-traded goods, because of the assumptions of marginal rates of transformation. The relationship between purchasing power parity and exchange rates provides the international comparison of national incomes and living standards (Bela Balassa, 1964). (Lawrence H. Officer, 1976) is the rese archer which gave another review of this purchasing power parity theory. It has define two applications in economics, the first application use of the conversion factor to transfer the data in one national way to another. The use of PPP is mainly the body of (index number theory) and applications of GDP that have improved over the years and path breaking studies in the area continue to appear. The second application of PPP has not the widespread acceptance, which has remained the unsophisticated applications. A.C. Stockman, (1980), develops the model of determination of exchange rates and prices of goods. The changes in prices of goods due to supply and demand would affect the changes in exchange rates with deviations of purchasing power parity. The changes in exchange rates have failed to resemble the changes in prices of goods, because exchange rates more volatile than prices levels and inflation rates. The research proposes the equilibrium of exchange rates behavior and different international goods that would have been traded. This relationship cannot be exploited by the government, because the greater the changes in terms of trade the larger the changes in exchange rates variability. The deviations from PPP persist that variation of exchange rates more than ratios of price indexes. The results found the two interpretation of the relationship between exchange rates and terms of trade. In the first, the causes that affect the changes in exchange rates would also affect the change in te rms of trade because prices of goods do not adjust to clear the markets. This interpretation would also found in the research of Dornbusch (1976), and Isard (1977), they formally differentiates the system with respect to exchange rates and allow prices to change but not the changing in asset stocks. The another interpretation presented the elasticity approach of the foreign exchange market and the relation between the trade and exchange rates. Real supply and demand shocks affect prices and the derived demand of exchange rates. The affect of such a shift has the advantage to raise the value of currency in terms of foreign currencies relative PPP. These changes in demand for foreign exchange would result the supply and demand shocks and that should affect the equilibrium of exchange rates. In second interpretation the expected rate of change of exchange rates revealed on the forward foreign exchange market. This should be related the anticipated change in the terms of trade and the i nflation differentials. A persuasive argument about the level of exchange rates is only associated with not causes of the relative prices changes. Clas Wihlborg, (1982), examined the relation of interest rates, exchange rate and currency risks in this research. It identifies the test which empirically impact of currency on interest rates and exchange rates. In this research there are three different ways in which the importance of currency risks for interest rate and exchange rate determination. First different risk characteristics of assets denominated in different currencies. Second changes in the level of risks that affect the elastic ties of substitutes among different assets and the monetary policy. Third changes in the level of risks on alternative assets which have a direct impact on rates of return. This research used the three specifications of the dependent variable to test the theory, firstly the rates of return is adjusted for the expected rate of changes in the exchange rates, second difference between nominal rates of interest and third rate of change of deviation from the exchange rate. The results presented here that substantiate the changes in the level of currency risk have a non-negligible impact on the rates of change of exchange rates and on relatives rates of interest between currencies. The risks explain the small share of variation in these variables. Another results indicate that the nominal interest rate seem to adjust in fiscal policies and savings behavior but not affect real rates of interest. But changes in relative risks level would affect relative rates on interest these changes still be important for the substitutability between assets of different currency denominations. Richard Meese Kenneth Rogoff, (1983), analysis the out of sample forecasting accuracy on various models. It estimated the horizons of the dollar with different country currencies, like Dutch mark, Japanese yen, and Britain pound that traded to weight the dollar exchange rates. Its also studied the flexible exchange rates with the monetary models of sticky price, so the model of sticky price, which incorporates the current account. The first model is structural models in which it requires to generate the forecasts of exchange rates and explanatory variables. It contains the explanatory power, but its predicted badly because the explanatory variables are difficult to predict. The second is the univariate times series model in which identify a variety of prefiltering techniques involve differencing, de-seasonalizing and removing time trends. The relative performance of these techniques is of interest in itself. The third model use is the random walk model; it should also link with this univariate time series model. It uses as the predictor of the current spot rate with the entire future spot rate, and it requires no estimation. In this research the performance of estimated univariate time series models or candidate structural model is so worse. From a methodological stand point the view that the out of sample model fit is an important criterion when evaluating exchange rate, but the estimation of out of sample is failure with time series models, that are well approximated the major country exchange rates. John Bilson, (1985), gives the empirical findings about macro economic and flexible exchange rate of the U.S dollar related to PPP theory. From the perspective of this research in which sluggish price adjustment in the commodity markets resulted in increased variability in exchange rates. For the demonstration of result it is important because the instability of floating exchange rate could be due to the inherent differences between commodity and foreign exchange markets. The determination of the expected future rate is impossible, because it is more difficult to reject the forward parity condition. The major part of the forward parity is the variation in the premium is due to the forecast. The object of this research is to determine that if the forward parity failed is the cause of instability in the same way that the failure of purchasing power parity. The findings develop that currency risk premium is the important factor relative to floating rate system, and movement in the excha nge rate are dominated by the non speculative activity and it has the adverse effect on world economy. Roger D. Huang, (1987), evaluate that the expected change in the exchange rate of two countries equals the expected differentials in their inflation rats over the same holding period. It makes the empirical evidence link with PPP theory and obtained that the changes in expected nominal exchange rate is appear to deviate inflation rate systematically. It relates the PPP based on the constraint that, in efficient market the net return to speculators engaging in speculation on goods in the foreign country. The purpose of this research is to know the equality restriction between expected nominal exchange rate and expected inflation rate differentials. The investigation should have the result that the evidence is inconsistent with the current floating exchange rates over the major industrialized countries. Since the test perform meaningful in conjunction with market efficiency and simply indicate the failure expectations. John Doukas Abdul Rahman, (1987), conducted the unit root test for the presence of evidence from the foreign exchange futures market, and gets the representation of foreign exchange currency future prices. The research describes the procedure from the foreign exchange future markets on five different currencies with varying maturity. It was found that presence in the series may cause the OLS estimates and its true value leading to errors, for small sample sizes the model has smaller forecast error. The process generate the log of currencies future rates by random walk, and it is consistent with other model of asset price determination that they imply the mean and dispersion of returns that don not change over short time period. But in general if follow the random walk; it is line with (Meese Singletons) findings from the spot and forward exchange market. H.J. Edison, (1987), addresses that whether PPP is valid in the long run movements in exchange rates, though it is failed in the short run. However number of studies was conduct for the behavior of exchange rates, Alder Lehmann (1983), Frankel (1986), developed more statistical techniques to examine the validity of exchange rates in the long run. Both of these have provided the evidence that PPP does not hold the exchange rates behavior in the long run. This research also incorporates the error correction mechanism and discusses the empirical results which generally show the result of failure of exchange rate support by PPP in the long run. In general, the result indicates the force which exists in the economy for driving the exchange rates towards the PPP equilibrium. The main conclusion from this research is the PPP relationship does not represents the exchange rates n the long run holding, so that the PPP permanent deviations cannot ruled out. This shows the reinforcement of PPP theory that was tested the fixed rate counterpart and the equalization of prices across countries, and it supports an interpretation of the PPP doctrine. This proportionality between the exchange rates and price level emerges in the long run. Richard Meese Kenneth Rogoff, (1988), examined the relationship between real exchange rates and real interest rate differentials from different countries. It based on the joint hypothesis that the prices of the domestic currency are sticky and the disturbances of monetary policy are predominant, which would found the little evidence of a stable relationship between interest rates and exchange rates. It is true that in many cases the sign of the estimated exchange rate and interest rate differential relationship is consistent with the possible predominance of financial market disturbances, but the relationship is not stable enough to be statistically significant. In Quasi reduced form real exchange rate models, examined the real versions of alternative rational expectations monetary models of exchange rate determination. In the nominal rate models, the exchange rate depends on fundamentals such as relative national money supplies, real incomes, short-term interest rates, expected inf lation differentials, and cumulated trade balances. The rationale view for this approach is that the nominal exchange rates poor performance is primarily attributable to money demand disturbances, so it can define the close relationship between there real interest differentials and real exchange rates, because, in the class of monetary models considered here, unanticipated money demand disturbances affect both variables proportionately. Feinberg Seth Kaplan, (1992), evaluate and interacts the real exchange rates index expectations is developed and used to explore the role of determination on domestic producer prices. The fact that time path of the exchange rate will directly affect the input costs, and the price of substitutes strongly. To examine the links between both actual and anticipated movements in the dollar and relative domestic producer prices, it chooses to analyze price responses to real exchange rate changes. The effect is dependent on the nature of substitutability between imports and domestic goods. The major finding is that the period of appreciation and depreciation over the past 10 years to inhibit the pass through in to domestic prices. In depreciation the market share to enjoy the continued good times kept prices other than expected. Warren Bailey Peter Chung, (1995), considers the study that the impact of fluctuations on exchange rates and political risk is on the risks premium and is reflected the individual equity returns. It suggests the factors which is common for emerging market equity, currency and debt markets, and make empirical implications to evaluate corporate and portfolio management. If price levels and exchange rate are significantly volatile and cannot be costly hedged, are adversely affected in the real value of the domestic currency. Some evidence that exchange rate fluctuations are a priced factor in cross sections of stock return converted into a common currency. The purpose of this research is to explore the impact of fluctuations on exchange rates and political risk which is consider on stock process of individual companies from the same country. The extent of measurement is that, which exposure factors explain cross sections of returns on individual securities and industry portfolios. The result suggests that the exchange rates and political risks could be significant in equity markets. The result also suggests that the risk premium can be time varying and not be detected by assuming constantly. This research shows the results that it did not find the evidence of the equity market premiums for the currency and political risk. It complements the importance to attach the exchange rates and political risk in the international finance. J.R. Lothian M.P. Taylor, (1996), examines the real exchange rate behavior, and explains the variations in sample of stationary univariate equations in real exchange rates. It investigates the additional insight in the exchange rates behavior that can be gained by considering the floating rate from the perspective of the data. These issues can be best understood on the subject of real exchange rates stability between the currencies of the major industrialized countries. Some of the pre-float studies support the fairly stable exchange rates in the long run. Subsequently, Dornbusch (1976), Frenkel (1981), gave largely as the result of studies published, and reject the hypothesis of random walk behavior of real exchange rates. The PPP shows the empirical movements in real exchange rates were highly persistent and effective; although the PPP is reject the hypothesis of non-stationary behavior of real exchange rates in the long run. The result of this research shows that the longest span of two countries exchange rates are significantly mean reverting. The first model result indicates the 80 percent of the variation in the exchange rates of the history data of two countries. By using of another model, the results explaining the performance of remarkably well in the floating, so that they produce better forecasts of the actual exchange rates. In line with recent studies, it fined that this process of mean reverting is quit slow, with estimated adjustment of data. In the long run the PPP equilibrium is remaining a useful empirical approximation. The deviations of the PPP that observe are consistent with the existence of slowly mean reverting influences, which may be real or monetary regimes. Theory of Optimum Currency Areas: The theory of optimum currency areas, which is usually presented the other name called flexible exchange rate system, but it is proponents as a device of depreciation that take the place of unemployment when the balance of payment is deficit and appreciation when it replace inflation when it is surplus. The problem can be exposed and more revealing by defining a currency area within when exchange rates are fixed. To this three answer can be given; first certain parts of the world are going processes of economic integration, so new experience can be made and at what constitutes the optimum currency area can give the meaning of these experiments. Second those countries that have flexible exchange rates are likely to face problems with the theory of optimum currency areas, so it does not coincide the optimum currency areas with the national currency. Third the idea that illustrates the functions of currencies which have been treated in economic literature, and sometimes neglected in the problems of economic policy. In the currency area, different currency countries including national country currencies interact pace of employment in deficit, because there is the willingness to inflation by the surplus countries. The argument for flexible exchange rate system is based on national currencies, and is valid about mobility of factor, so if it is high in the country and low in the foreign countries, the flexible exchange rates system on home country currencies might work effectively. The concept of optimum currency area has practically applicable only in those areas, where the state has the political organization in the country. The factor mobility is most considered is more relative rather than absolute concept, with both industrial and geographical. It likely to change the alterations with time over time in conditions, where the conditions of political and economic stability. Money is the convenience that restricts the optimum number of currencies, so in terms of this argument the optimum currency area which is composed in number of countries. (Robert A. Mundell, 1961). In another review the author defines the stabilization of capital mobility policy under the exchange rates which is fixed and flexible in the currencies markets; it concerns the theoretical and practical approach of the increased mobility of capital. The assumption is that the interest rate differentials from the level of abroad cannot maintain by the country, if there is the degree of mobility. The securities system are perfect substitutes, because different currencies are involved can be taken in the perfect mobilization, and there exchange rates expected to persist indefinitely, but the forward and spot exchange rate are identical. It identify the monetary and fiscal policy, in which monetary policy assumed the open market purchase of securities while fiscal policy is to form of increase in government spending and financed by an increased in public debt. Its effect the floatin g exchange rate result when monetary policy does not intervene in the exchange market, but it intervene the fixed exchange rates, when the buying and selling of international reserves at the rate of fixed price. The results of this research analyze that, the fixed exchange rates is become a device for the monetary policy and for the levels of reserve, whereas the flexible exchange rates becomes a device for the fiscal policy and for the balance of trade, but policies are unaffected to the level of output and employment. The fixed exchange rates in the perfect mobility will lead to the breakdown as the absence of gold sterilization. The gold sterilization is frustrated the capital outflows and offsetting monetary changes through the exchange rates equalization. The conclude remarks is that, the fixed exchange rates as compared to flexible exchange rates is ineffective under monetary policy, but in fiscal policy both the exchange rates either fixed or flexible are remains weaker for a chieving the level of output. The flexible exchange rates under fiscal policy to play some role in employment policy that can be expected, while monetary policy can have influence on output under fixed exchange rates. In this possibility existing, it wills lesser extent in the future. (R.A. Mundell, 1968). J.H. Makin, (1978), analysis the way to deal the risks involved in foreign exchange currency positions but exchange rates are uncertain. It incorporates the exchange rate changes with the changes in the determination of overall hedging strategy. The purpose is to survey the literature rather to examine the logic on hedge no hedge strategy and to suggest the viewing problem of exchange risk. It identifies the exchange risk diversification in two groups. First diversification investigates the exchange risk with the investor point of view selecting the locations of firms in different countries which denominated in different currencies. The second considers exchange risk with the firm manager point of view to decrease the impact of exchange rate fluctuations. The study concentrates the exchange risk and not overall corporate risk, so the analysis of co Exchange Rates and Interest Rates in Pakistan Analysis Exchange Rates and Interest Rates in Pakistan Analysis Abstract This paper endeavors the relationship and the positive effect between exchange rates and interest rates in Pakistan by utilizing the foreign exchange market and current scenario of increasing interest rates because of increasing exchange rates to represent the economic position of Pakistan. The data by the researcher is all on daily basis for the above variables from the period of September 2001 to May 2008 for exchange rates, while for interest rates (6 month KIBOR) from the period of September 2001 to May 2008. The researcher implement regression model to test the effect of exchange rates progression on interest rates. So in this result, there is the issue of auto correlation exists and it shows the serial correlation between these variables. The issue should be resolved by taking time and KIBOR lag values as the dumm dependent variables. The study concludes on this way that there is the negative relationship between exchange rates and interest rates (KIBOR) in Pakistan and there i s the impact of time and KIBOR on KIBOR.. It identifies that when exchange rates increases, there is decreasing in interest rates (KIBOR). This results and relationship is consistent as predicted by Meese and Rogoff (1988). INTRODUCTION Every country has its own financial markets and it is the back bone of a countrys economy. The financial markets is divided in parts like foreign exchange market, stock market, money market, bond market etc. In this study, the researcher is focuses on the foreign exchange market, which is commonly known as Forex. It is the largest and most prolific part of financial market and defining the balancing of countrys economy, because every particular day, there are approximately one trillion amount of foreign exchange takes place in the countries around the world. The actual mechanism of the foreign exchange, that it is work as the main driving force for an any countys economy in the world. Therefore, any country in the world should challenge their currency in the global economic markets. In the exchange markets for all the countries, home country currencies trade with other foreign country currencies. The foreign exchange market system is needed for every developed and under developed cou ntry; this system known as currency in exchange determination. For the determination of the value of a currencys exchange rate, there are two main types of system is used, one is floating exchange rates system and the other is fixed exchange rates system. The intervention of government officials authorities in the foreign exchange market is to influence the exchange rate fluctuation as a worldwide phenomenon. The authorities intervene maintaining the objective to orderly market conditions that ultimately help to achieve the overall macroeconomic goals. However, the exchange rate has playing an important role in terms of the flexibility in macroeconomic framework to deal with changes in the external terms of trade, but the monetary policy also aims the national objectives of economic diversification and to support export competitiveness. The ineffective monetary policy under fixed exchange rates as compared to flexible exchange rates, but fiscal policy under both fixed and flexible exchange rates remains weaker of achieving the level of output. (R.A. Mundell, 1968). The level of currency risk changes, it has no negligible impact on the rates of change of exchange rates and on relatives rates of interest between currencies. (Clas Whilborg, 1982). The risk premium of the currency is the important factor relative to floating exchange rate system, but movements in the exchange rate are dominated by the non speculative activity and it has the adverse effect on world economy. (John bilson, 1985). The true statement that in many cases the sign of the estimated exchange rate-interest rate differential relationship is consistent with the possible predominance of financial market disturbance (R. Meese K. Rogoff, 1988). The consequences changes in the nominal interest rate reflect changes in the tightness of monetary policy. T he higher the interest rate in the country attracts the capital inflow, which causes the domestic currency appreciates, so this gets the relationship could be negative between the exchange rate and nominal interest rate differentials. (J.A. Frankel, 1979). The assets are dominated and exchange risks interest reflects the interest rate parity when different currencies affect political risk and thats why assets are issued in different currencies. Thus the interest differentials to the political risk of future capital control must be distinguished due to the effective tax that controls the place in interest earnings. (M.P. Dooley P. Isard, 1980). The concept of political risk is that the probability authority of the state will be interposed between investors in one country and investment opportunities in other countries that is the probability that controls the imposed on capital flows. (R.Z. Aliber, 1973). If price levels and exchange rate are significantly volatile and cannot be cos tly hedged, are adversely affected in the real value of the domestic currency. There is some evidence that exchange rate fluctuations are a priced factor in cross sections of stock return converted into a common currency. (W. Bailey P. Chung, 1995). In the perfect mobility the exchange rate movements and an adjustment of goods market is relative to asset market and consistent expectations. The extends that output responds to a monetary expansion in the short run, this acts as an effect on exchange depreciation which lead to an increase in interest rates. (Rudiger Dornbusch, 1976). The foreign exchange gain or loss is made in the course of covering; consider being capital assets, so this gain or loss treated on capital account. This shows the highly sensitive interest dynamics with exchange rates. (M.D. Levi, 1977). The variability of industrial production output will be higher in the regime of fixed exchange rates instead of regime of flexible exchange rates. (Flood Hodrick, 1986) . The effect of consumption goods purchases by the government is not the private utility, but per capita real government expenditure are the composite of individual consumption of goods. So notice that the demand of money its depends on consumption of goods rather than income and that is the important distinction of closed economies.(Obstfeld Rogoff, 1995). The fixed and floating exchange rates depend on higher welfare yield and on the nature of sticky prices, so the risk would be shared and there are some opportunities to aware. The evidence, which should give opportunities about price setting and risk sharing are not refined and not to make the definite conclusions for the optimal regime of the exchange rate of that country. There are three types of ways which gives stickiness in prices, the prices which would set by the firms in their own currencies, the firms would set the prices for consumers currencies, or firms would set the prices in the currencies of producers. (Charles En gel, 2001). When the exchange rates changes, it may cause to appear the changes in relative prices and make to generate additional uncertainty for equilibrium in markets. However, there is also defining that the changes in terms of trade would play the larger role of changes in the exchange rates which affect the variability of exchange rates. (A.C. Stockman, 1980). This study explores to investigate the determinants of exchange rates in developing country such as Pakistan. The framework of this study is concern to be conceptual and theoretical and is to set up the ground of unidirectional causality from exchange rates to economy. In principal, it determines the exchange rates relationship with interest rates so it will spurs the determinants in Pakistan with related to the economy. This view implies that the choice of an exchange rates regime be a relatively simple, if countries were faced to intervene regularly in the foreign exchange market to stabilize, therefore the monetary authorities intervene with the objective of maintaining orderly market conditions, which ultimately help to achieve the overall macroeconomic goals. The discretionary nature of the existing monetary policy in Pakistan is inflation, and it is targeting to hit on the Pakistani economy by focusing attention on the monetary policy. So the government of Pakistan is to make t heir monetary policy more transparent for achieving their explicit goal, and decreasing the inflation. Therefore, it is increasing the publics understanding of the central banks strategy to deliver the target, so the State Bank of Pakistan will help to provide an anchor for inflation expectations in the economy. The State Bank of Pakistan (SBP) has accorded a high priority to achieving a low rate of inflation, and the monetary policy also aims to support the objectives of the national country of Pakistan to meet their diversified economy and competitiveness in the export from other countries of the world. This study will also helpful to the SBP to developed their awareness of the relationship of exchange rates with KIBOR, so SBP may observed the controversy of their ups and downs fluctuations so it may controlled significantly. The bank treasury department should get the help because, they have continuously meet the exchange rates and make transactions of the countrys currency with others country currencies, so it should make them identify that if exchange rates increases or decreases it should not make effect on interest rates but their should be some inverse effect in nature. This effect should create controversy in the country economy so the central bank should make some authorized decisi on to controlled the exchange rates and interest rates The thesis is structures as follows. Chapter II provides literature review. Chapter III defines the outline of variables, their sample size, data sources and its formatting and the model. Chapter IV explains our findings and results. Finally Chapter V reports conclusion Chapter II Literature Review: This study relates to examine the relationship and effect between exchange rates with interest rates. Numbers of studies have done by the researchers, Robert A. Mundell, (1961), Bela Balassa (1964), Robert Z. Aliber, (1973), Rudiger Dornbusch, (1976), Richard A. Meese Kenneth Rogoff (1982), H.M.S Gerlach (1988), to investigate the determinants of exchange rates have applied in the world exchange rates market and help for different countries in their market development and economic growth. Researchers attempted to exemplify whether, how and to what extent the determinants of exchange rates market can contribute to the process of economic growth. Purchasing Power Parity Theory: The purchasing power parity theory doctrine means different things to different people. It has two versions of this theory that can be called the absolute and the relative interpretation. The first version of purchasing power theory calculated as a ratio of consumer goods prices for any country would tend to the equilibrium rates of exchange. In the second version of relative interpretation the rate of exchange rate would be determined between two countries and quoted with general levels of prices of two countries. It amend the international trade theory which would be the part of PPP, in which introducing the non-traded goods (services), but the advantage is greater in regards of traded goods than non-traded goods, because of the assumptions of marginal rates of transformation. The relationship between purchasing power parity and exchange rates provides the international comparison of national incomes and living standards (Bela Balassa, 1964). (Lawrence H. Officer, 1976) is the rese archer which gave another review of this purchasing power parity theory. It has define two applications in economics, the first application use of the conversion factor to transfer the data in one national way to another. The use of PPP is mainly the body of (index number theory) and applications of GDP that have improved over the years and path breaking studies in the area continue to appear. The second application of PPP has not the widespread acceptance, which has remained the unsophisticated applications. A.C. Stockman, (1980), develops the model of determination of exchange rates and prices of goods. The changes in prices of goods due to supply and demand would affect the changes in exchange rates with deviations of purchasing power parity. The changes in exchange rates have failed to resemble the changes in prices of goods, because exchange rates more volatile than prices levels and inflation rates. The research proposes the equilibrium of exchange rates behavior and different international goods that would have been traded. This relationship cannot be exploited by the government, because the greater the changes in terms of trade the larger the changes in exchange rates variability. The deviations from PPP persist that variation of exchange rates more than ratios of price indexes. The results found the two interpretation of the relationship between exchange rates and terms of trade. In the first, the causes that affect the changes in exchange rates would also affect the change in te rms of trade because prices of goods do not adjust to clear the markets. This interpretation would also found in the research of Dornbusch (1976), and Isard (1977), they formally differentiates the system with respect to exchange rates and allow prices to change but not the changing in asset stocks. The another interpretation presented the elasticity approach of the foreign exchange market and the relation between the trade and exchange rates. Real supply and demand shocks affect prices and the derived demand of exchange rates. The affect of such a shift has the advantage to raise the value of currency in terms of foreign currencies relative PPP. These changes in demand for foreign exchange would result the supply and demand shocks and that should affect the equilibrium of exchange rates. In second interpretation the expected rate of change of exchange rates revealed on the forward foreign exchange market. This should be related the anticipated change in the terms of trade and the i nflation differentials. A persuasive argument about the level of exchange rates is only associated with not causes of the relative prices changes. Clas Wihlborg, (1982), examined the relation of interest rates, exchange rate and currency risks in this research. It identifies the test which empirically impact of currency on interest rates and exchange rates. In this research there are three different ways in which the importance of currency risks for interest rate and exchange rate determination. First different risk characteristics of assets denominated in different currencies. Second changes in the level of risks that affect the elastic ties of substitutes among different assets and the monetary policy. Third changes in the level of risks on alternative assets which have a direct impact on rates of return. This research used the three specifications of the dependent variable to test the theory, firstly the rates of return is adjusted for the expected rate of changes in the exchange rates, second difference between nominal rates of interest and third rate of change of deviation from the exchange rate. The results presented here that substantiate the changes in the level of currency risk have a non-negligible impact on the rates of change of exchange rates and on relatives rates of interest between currencies. The risks explain the small share of variation in these variables. Another results indicate that the nominal interest rate seem to adjust in fiscal policies and savings behavior but not affect real rates of interest. But changes in relative risks level would affect relative rates on interest these changes still be important for the substitutability between assets of different currency denominations. Richard Meese Kenneth Rogoff, (1983), analysis the out of sample forecasting accuracy on various models. It estimated the horizons of the dollar with different country currencies, like Dutch mark, Japanese yen, and Britain pound that traded to weight the dollar exchange rates. Its also studied the flexible exchange rates with the monetary models of sticky price, so the model of sticky price, which incorporates the current account. The first model is structural models in which it requires to generate the forecasts of exchange rates and explanatory variables. It contains the explanatory power, but its predicted badly because the explanatory variables are difficult to predict. The second is the univariate times series model in which identify a variety of prefiltering techniques involve differencing, de-seasonalizing and removing time trends. The relative performance of these techniques is of interest in itself. The third model use is the random walk model; it should also link with this univariate time series model. It uses as the predictor of the current spot rate with the entire future spot rate, and it requires no estimation. In this research the performance of estimated univariate time series models or candidate structural model is so worse. From a methodological stand point the view that the out of sample model fit is an important criterion when evaluating exchange rate, but the estimation of out of sample is failure with time series models, that are well approximated the major country exchange rates. John Bilson, (1985), gives the empirical findings about macro economic and flexible exchange rate of the U.S dollar related to PPP theory. From the perspective of this research in which sluggish price adjustment in the commodity markets resulted in increased variability in exchange rates. For the demonstration of result it is important because the instability of floating exchange rate could be due to the inherent differences between commodity and foreign exchange markets. The determination of the expected future rate is impossible, because it is more difficult to reject the forward parity condition. The major part of the forward parity is the variation in the premium is due to the forecast. The object of this research is to determine that if the forward parity failed is the cause of instability in the same way that the failure of purchasing power parity. The findings develop that currency risk premium is the important factor relative to floating rate system, and movement in the excha nge rate are dominated by the non speculative activity and it has the adverse effect on world economy. Roger D. Huang, (1987), evaluate that the expected change in the exchange rate of two countries equals the expected differentials in their inflation rats over the same holding period. It makes the empirical evidence link with PPP theory and obtained that the changes in expected nominal exchange rate is appear to deviate inflation rate systematically. It relates the PPP based on the constraint that, in efficient market the net return to speculators engaging in speculation on goods in the foreign country. The purpose of this research is to know the equality restriction between expected nominal exchange rate and expected inflation rate differentials. The investigation should have the result that the evidence is inconsistent with the current floating exchange rates over the major industrialized countries. Since the test perform meaningful in conjunction with market efficiency and simply indicate the failure expectations. John Doukas Abdul Rahman, (1987), conducted the unit root test for the presence of evidence from the foreign exchange futures market, and gets the representation of foreign exchange currency future prices. The research describes the procedure from the foreign exchange future markets on five different currencies with varying maturity. It was found that presence in the series may cause the OLS estimates and its true value leading to errors, for small sample sizes the model has smaller forecast error. The process generate the log of currencies future rates by random walk, and it is consistent with other model of asset price determination that they imply the mean and dispersion of returns that don not change over short time period. But in general if follow the random walk; it is line with (Meese Singletons) findings from the spot and forward exchange market. H.J. Edison, (1987), addresses that whether PPP is valid in the long run movements in exchange rates, though it is failed in the short run. However number of studies was conduct for the behavior of exchange rates, Alder Lehmann (1983), Frankel (1986), developed more statistical techniques to examine the validity of exchange rates in the long run. Both of these have provided the evidence that PPP does not hold the exchange rates behavior in the long run. This research also incorporates the error correction mechanism and discusses the empirical results which generally show the result of failure of exchange rate support by PPP in the long run. In general, the result indicates the force which exists in the economy for driving the exchange rates towards the PPP equilibrium. The main conclusion from this research is the PPP relationship does not represents the exchange rates n the long run holding, so that the PPP permanent deviations cannot ruled out. This shows the reinforcement of PPP theory that was tested the fixed rate counterpart and the equalization of prices across countries, and it supports an interpretation of the PPP doctrine. This proportionality between the exchange rates and price level emerges in the long run. Richard Meese Kenneth Rogoff, (1988), examined the relationship between real exchange rates and real interest rate differentials from different countries. It based on the joint hypothesis that the prices of the domestic currency are sticky and the disturbances of monetary policy are predominant, which would found the little evidence of a stable relationship between interest rates and exchange rates. It is true that in many cases the sign of the estimated exchange rate and interest rate differential relationship is consistent with the possible predominance of financial market disturbances, but the relationship is not stable enough to be statistically significant. In Quasi reduced form real exchange rate models, examined the real versions of alternative rational expectations monetary models of exchange rate determination. In the nominal rate models, the exchange rate depends on fundamentals such as relative national money supplies, real incomes, short-term interest rates, expected inf lation differentials, and cumulated trade balances. The rationale view for this approach is that the nominal exchange rates poor performance is primarily attributable to money demand disturbances, so it can define the close relationship between there real interest differentials and real exchange rates, because, in the class of monetary models considered here, unanticipated money demand disturbances affect both variables proportionately. Feinberg Seth Kaplan, (1992), evaluate and interacts the real exchange rates index expectations is developed and used to explore the role of determination on domestic producer prices. The fact that time path of the exchange rate will directly affect the input costs, and the price of substitutes strongly. To examine the links between both actual and anticipated movements in the dollar and relative domestic producer prices, it chooses to analyze price responses to real exchange rate changes. The effect is dependent on the nature of substitutability between imports and domestic goods. The major finding is that the period of appreciation and depreciation over the past 10 years to inhibit the pass through in to domestic prices. In depreciation the market share to enjoy the continued good times kept prices other than expected. Warren Bailey Peter Chung, (1995), considers the study that the impact of fluctuations on exchange rates and political risk is on the risks premium and is reflected the individual equity returns. It suggests the factors which is common for emerging market equity, currency and debt markets, and make empirical implications to evaluate corporate and portfolio management. If price levels and exchange rate are significantly volatile and cannot be costly hedged, are adversely affected in the real value of the domestic currency. Some evidence that exchange rate fluctuations are a priced factor in cross sections of stock return converted into a common currency. The purpose of this research is to explore the impact of fluctuations on exchange rates and political risk which is consider on stock process of individual companies from the same country. The extent of measurement is that, which exposure factors explain cross sections of returns on individual securities and industry portfolios. The result suggests that the exchange rates and political risks could be significant in equity markets. The result also suggests that the risk premium can be time varying and not be detected by assuming constantly. This research shows the results that it did not find the evidence of the equity market premiums for the currency and political risk. It complements the importance to attach the exchange rates and political risk in the international finance. J.R. Lothian M.P. Taylor, (1996), examines the real exchange rate behavior, and explains the variations in sample of stationary univariate equations in real exchange rates. It investigates the additional insight in the exchange rates behavior that can be gained by considering the floating rate from the perspective of the data. These issues can be best understood on the subject of real exchange rates stability between the currencies of the major industrialized countries. Some of the pre-float studies support the fairly stable exchange rates in the long run. Subsequently, Dornbusch (1976), Frenkel (1981), gave largely as the result of studies published, and reject the hypothesis of random walk behavior of real exchange rates. The PPP shows the empirical movements in real exchange rates were highly persistent and effective; although the PPP is reject the hypothesis of non-stationary behavior of real exchange rates in the long run. The result of this research shows that the longest span of two countries exchange rates are significantly mean reverting. The first model result indicates the 80 percent of the variation in the exchange rates of the history data of two countries. By using of another model, the results explaining the performance of remarkably well in the floating, so that they produce better forecasts of the actual exchange rates. In line with recent studies, it fined that this process of mean reverting is quit slow, with estimated adjustment of data. In the long run the PPP equilibrium is remaining a useful empirical approximation. The deviations of the PPP that observe are consistent with the existence of slowly mean reverting influences, which may be real or monetary regimes. Theory of Optimum Currency Areas: The theory of optimum currency areas, which is usually presented the other name called flexible exchange rate system, but it is proponents as a device of depreciation that take the place of unemployment when the balance of payment is deficit and appreciation when it replace inflation when it is surplus. The problem can be exposed and more revealing by defining a currency area within when exchange rates are fixed. To this three answer can be given; first certain parts of the world are going processes of economic integration, so new experience can be made and at what constitutes the optimum currency area can give the meaning of these experiments. Second those countries that have flexible exchange rates are likely to face problems with the theory of optimum currency areas, so it does not coincide the optimum currency areas with the national currency. Third the idea that illustrates the functions of currencies which have been treated in economic literature, and sometimes neglected in the problems of economic policy. In the currency area, different currency countries including national country currencies interact pace of employment in deficit, because there is the willingness to inflation by the surplus countries. The argument for flexible exchange rate system is based on national currencies, and is valid about mobility of factor, so if it is high in the country and low in the foreign countries, the flexible exchange rates system on home country currencies might work effectively. The concept of optimum currency area has practically applicable only in those areas, where the state has the political organization in the country. The factor mobility is most considered is more relative rather than absolute concept, with both industrial and geographical. It likely to change the alterations with time over time in conditions, where the conditions of political and economic stability. Money is the convenience that restricts the optimum number of currencies, so in terms of this argument the optimum currency area which is composed in number of countries. (Robert A. Mundell, 1961). In another review the author defines the stabilization of capital mobility policy under the exchange rates which is fixed and flexible in the currencies markets; it concerns the theoretical and practical approach of the increased mobility of capital. The assumption is that the interest rate differentials from the level of abroad cannot maintain by the country, if there is the degree of mobility. The securities system are perfect substitutes, because different currencies are involved can be taken in the perfect mobilization, and there exchange rates expected to persist indefinitely, but the forward and spot exchange rate are identical. It identify the monetary and fiscal policy, in which monetary policy assumed the open market purchase of securities while fiscal policy is to form of increase in government spending and financed by an increased in public debt. Its effect the floatin g exchange rate result when monetary policy does not intervene in the exchange market, but it intervene the fixed exchange rates, when the buying and selling of international reserves at the rate of fixed price. The results of this research analyze that, the fixed exchange rates is become a device for the monetary policy and for the levels of reserve, whereas the flexible exchange rates becomes a device for the fiscal policy and for the balance of trade, but policies are unaffected to the level of output and employment. The fixed exchange rates in the perfect mobility will lead to the breakdown as the absence of gold sterilization. The gold sterilization is frustrated the capital outflows and offsetting monetary changes through the exchange rates equalization. The conclude remarks is that, the fixed exchange rates as compared to flexible exchange rates is ineffective under monetary policy, but in fiscal policy both the exchange rates either fixed or flexible are remains weaker for a chieving the level of output. The flexible exchange rates under fiscal policy to play some role in employment policy that can be expected, while monetary policy can have influence on output under fixed exchange rates. In this possibility existing, it wills lesser extent in the future. (R.A. Mundell, 1968). J.H. Makin, (1978), analysis the way to deal the risks involved in foreign exchange currency positions but exchange rates are uncertain. It incorporates the exchange rate changes with the changes in the determination of overall hedging strategy. The purpose is to survey the literature rather to examine the logic on hedge no hedge strategy and to suggest the viewing problem of exchange risk. It identifies the exchange risk diversification in two groups. First diversification investigates the exchange risk with the investor point of view selecting the locations of firms in different countries which denominated in different currencies. The second considers exchange risk with the firm manager point of view to decrease the impact of exchange rate fluctuations. The study concentrates the exchange risk and not overall corporate risk, so the analysis of co