CURR FLUCTUA
an insight into majo
RENCY ATIONS:
or economical shifts
Matt Guida Zhenyu Stein Wang Devjoy Roy
INTRODUCTION
Our Goal: Currency Fluctuation: An Insight Into Major Economic Shifts focuses on illustrating the strength and fluctuation of various currency rates over a time series of ten years, from 2005-2015. The project will offer an insight in the relationship between currency and various economic factors which dictate a country’s overall economic status. Swiss Franc as a constant: Currencies are traded and evaluated in pairs, making one stronger or weaker in relation to another. For this reason, our group decided to use the Swiss Franc as a constant, the benchmark to which each currency will be evaluated against. The rationale for choosing the Swiss Franc as the constant is due to the controlled stability of the small Swiss economy in regards to GDP, inflation and debt.(1) Economist Nikita Krichevsky explains strategy of the The Swiss National Bank, “The Swiss do not want volatility in their finances, they rely not on speculation but on real production…Switzerland maintains financial neutrality and relies on stability with low but sustained growth of economic indicators, avoiding speculation” (2).
DATA SETS Trade: UN Comtrade Database Stock data:
Yahoo Finance GDP data: OECD - Organization for Economic Co-Operation and Development International Monetary Fund Currency data: Bank of Canada Inflation Data: USA- US Bureau of Labor Statistics EU- European Central Bank CHINA- Economical Indicators of Countries
A GLANCE INTO
VISUALIZATION THE CONSTANT & THE COMPARISONS
UNITED STATES USD & FACTORS
An introduction to our chosen currencies and the comparison it makes to the constant (Swiss-Franc)
USD interactive chart (GDP,Ination,Stocks,Trade)
CHINA CNY & FACTORS
CNY interactive chart (GDP,Inflation,Stocks,Trade)
EUROPEAN UNION EUR & FACTORS
EUR interactive chart (GDP,Inflation,Stocks,Trade)
TO VIEW INTERAVTIVE VISUALIZATION PLEASE VISIT: http://currency-fluctuation.herokuapp.com
VISUALIZATION EXPLAINED
Visual Communication This visualizations goal is to communicate to the viewer that there are noticeable relationships between the currencies and economical factors around the globe. We set out to achieve an intuitive experience with an aesthetically rational and pleasing data map. The challenge that we faced was compiling a heap of data while making it fluid and effortless for the user to understand. Since we were dealing with a large amount of variables, we took the objective of stripping down the unnecessary and making it as simple as possible for the reader, as well as ourselves. If we were to get lost in the information while creating the visualization, there would be a good chance that the user would experience something similar. The experience of Currency Fluctuation: An Insight Into Major Economical Shifts is dictated by the interactions that we have created in order to reveal certain sets of information to the reader. It was important that we made affordances for the user to explore our interface and discover certain layers of information since there is a considerable amount of data to investigate and study. For example, we have certain animations that allow natural intuition to help progress through the data map. We also believe that color is used in effective ways such differentiating certain elements and bringing attention to an important factor. It also helps the visual language to be aesthetically attractive. More features such as icons help navigate through the visualization. This all combines to communicate large sets of data seamlessly.
VISUALIZATION EXPLAINED (CONT’D)
User Navigation It was imperative for us to create a fluid experience for the user while grasping a firm understanding of the information that is put forth. After collectively sketching and prototyping the user interface, we believe what we have designed is a well thought through navigation for this visualization. We begin with presenting the user with a simplified map, highlighting 3 key areas (USA, Europe, China) as well as introducing the user to our main focuses which are the comparative and constant currencies, each being represented by a numerical value and their respected currency symbol. Below those elements is a timeline of sorts. Since part of this visualization is a time-based comparison, our timeline is interactive to encourage users to play and experiment to discover what is affected and altered. Dragging the circular icon on the timeline will allow the user to see real-time changes to the currency value based on the position of where he/she drags the icon. The exact date is displayed by a hovering bubble over the circular icon. After understanding the focus, our users should be drawn to the animated flags that are placed on the geographical map. The animation suggests that it is interactive, and therefore clickable. Each of these flags will reveal the in-depth data sets corresponding with the appropriate country. The user will be presented with a time-series line graph that consists of our chosen external factors to relate to the currency data, over a span of 10 years (2005-2015). Each factor is interactive and reveals the information systematically while the graph changes correspondingly. With all of these interactive elements and graphical cues, we hoped to achieve a successful visualization that embodies the story and focus of which we studied.
METHODOLOGY
What was our focus? Since we are dealing with large sets of data to synthesize into a comprehensive visualization, we collectively decided to analyze the relationship between the currencies and various economic factors, providing insight on the economic strength of each country. This would provide us with a relatively simple method for us to create a foundation to which we can critically analyze the collected the data. How do we narrow down an expansive system for our vizualization? With an established benchmark, our group chose three currencies to evaluate against the Swiss Franc. In order for the visualization to offer insight on an international scale we decided to choose three major currencies from different continents representing North America, Asia and Europe. The chosen currencies are as follows: The U.S. Dollar (USD), the Chinese Yuan (CNY) and the European Euro (EUR). Developing our framework for analysisComparing currency rates can be an ambiguous task as there are several financial, economic, psychological and speculative factors that influence the fluctuation of a currency. In order to create an accurate visualization, we needed both quantitative and qualitative data to compare to gain a panoramic understanding of our focus. As a group we established a number of quantifiable variables that we believe may influence a country’s currency. The variables are as follows: Trade (import&export), world/national news, inflation rates, GDP and the stock market, specifically the S&P 500. Majority of the collected datasets will be analyzed by a quarterly period, with the exception of trade and news events. Trade (import & export) will be quantified monthly where as news events will be evaluated on a day-day basis.
METHODOLOGY
(CONT’D)
Trade-Import & Export (Monthly Analysis) When researching into our chosen countries’ trading, we looked deeply into their import & export history, as well as their relationships between various other countries. Trading holds an important part to sustaining our global economy since it is a main driver for business beyond borders. Each country usually specializes in a certain industry that is desired and in-turn are exported to the different nations. A lot of these industries are mass-consumed which can account to be a considerable segment of a country’s economy. For example, one of China’s largest exporting businesses (among many) is in the electronic equipment industry which accounts for around 24.4% of total exports (3). Using China as an example again, their entire exporting business makes up for about 13.3% of the entire economy which is quite a substantial amount for the second largest economy in the world. Exporting means gaining money for a country and to monetize the collected foreign currencies, while importing means spending money to acquire certain resources a country is dependent upon (4). Both are a catalyst to maintaining economical strength, meaning that the goal for sustaining a successful trading record is having close to an equal amount of importing and exporting. To put it simply, if the import percentage is greater than the export percentage, more money is being spent than being made which could lead to a trade deficit (5). The relationship between a country’s currency value and trading goods is critical in order to maintain a steady expense while also being perceived as an opportunity to grow earnings. While researching the import & export business of our chosen countries we believed that analyzing it monthly would make the most sense since the data we collected would be easier to visualize if it was synthesized by a monthly basis. News & Events (Daily Analysis) We knew that solid numbers wouldn’t be the only approach to analyze the fluctuations of a country’s economy. Extending beyond quantitative values, we decided to research into major events and happenings ranging from 2005-2015. After our research into the available catalogue of information and case studies, we discovered that social implications, technological advancements, political backlash/development and environmental happenings could all possibly affect a currency’s value.
METHODOLOGY
(CONT’D)
For example, technological advancements in the transportation industry have lead to improved methods of trading which facilitate trade quantity and efficiency, which in-turn strengthens an economy (6). So for us to find a reason as to why the chosen currencies fluctuate at certain times we tried to connect the numbers with key events that happened around that time period. Since there is no schedule for what happens around the world, we synthesized this information in a daily manner for our visualization so it would be more effective to compare it with the time of change regarding the currency. Inflation Rate (Quarterly Analysis) Inflation is often daunting term in economics, as it can be unpredictable and pose a problem to consumers, investors and countries as a whole. Inflation is defined as, “a sustained increase in the general level of prices for goods and services” (7). Therefore, as inflation rises, the value, or purchasing power of a dollar decreases. Due to the complexity of the economy, it is impossible to determine a single reason for the rise or fall of inflation rates however, two general economic theories attempt to simplify fluctuations: “Demand-Pull inflation which occurs when demand is greater then supply, in turn raising prices” and, “Cost-Push,” Inflation, which occurs when companies’ cost rises, leading to a rise in the price of goods.(8) A country’s rate of inflation is measured by a price index. The price index is acquired by gathering a number of diverse goods that represent the economy as a whole. The prices of these goods are totalled and placed into what is known as a, “market basket,” which is now a benchmark price to inflation. The cost of the, “market basket,” is totalled monthly, comparing it to it’s original price. The difference in percentage is the economy’s inflation rate (9). A country’s rate of inflation and currency are often correlated, as a country’s inflation rate may influence the purchasing power of a consumer, the cost of production for businesses and the currency as a whole. Stocks(Daily Analysis) The perpetual fluctuations of the stock market are often a reflection or reaction to economic circumstances, whether real or speculative. The stock market is a network of buyers and sellers, in which investors have the opportunity to purchase a stake of ownership in a company. The price of any given stock can fluctuate by the minute, as several market forces are constantly affecting stock prices. In theory, the price of a given stock is based on the supply and demand from the market.
METHODOLOGY
(CONT’D)
As a group we decided to focus on the Standard and Poor’s (S&P) 500 to represent the U.S. in our visualization, as it is the largest stock index, consisting of 500 diverse enterprises which we feel best represents the American economy as a whole. Furthermore, we chose Euronext NV to represent Europe, and the Shanghai Stock Exchange to represent China. Stock market data is quantified daily in the visualization due to its high volatility. The relationship between the stock market and a country’s currency and economy is quite ambiguous. It is difficult to determine where causation may begin, and where correlation might stop (13). It is difficult to determine if a bullish (rising) stock market is an indication of a healthy or progressing economy, or whether a rising stock market is flourishing because of a healthy economy. The relationship between currency and the stock market has a number of economic, psychological, quantitative and speculative factors constantly affecting both sides. GDP(Quarterly Analysis) The Gross Domestic Product (GDP) of a country is arguably the most important economic statistic as is provides insight to the economy’s overall condition in a single number. GDP is the sum, in monetary value, of all the goods and services produced by the population (10). Since the The GDP measurement is universal around the world, it can be used to compare the health, growth and productivity of countries economies. Although measuring GDP is a complex calculation, it can be estimated using three methods: output/production, expenditure and income. Output/production deals with the value of all goods and services produced in all sectors of the economy minus all the inputs (cost) used in their creation. The expenditure calculation represents the value of all goods and services purchased by consumers, and income measure is calculated as the sum of the income of individuals and corporations as a whole directly from the production of goods and services (11). Although these definitions appear simple and straightforward, large amounts of data are required to accomplish each calculation. Similar to the rate of inflation, GDP is calculated quarterly, as it provides an insight to economic growth and productivity. If a country’s GDP is relatively low in comparison to the prior quarter, the value of currency usually decreases. GDP measurements are also valuable to national banks, as it is used as the primary indicator when adjusting interest rates, which may also affect the value of a country’s currency (12).
REFLECTION
Currency Fluctuation: An Insight Into Major Economic Shifts is a visualization analyzing the relationship of various currencies and many economic factors. Our group began in Tableau, creating a time-series based, line graph. We then chose to create a more dynamic visualization to optimize user experience. The visualization quantifies large sets of data and illustrates these economic factors in a simple, understandable manner. A major strength of the visualization is the affordability of user exploration. The currency fluctuation of a selected country can be compared and contrasted with specific economic factors which are provided as selectable filters. These can be viewed either one at a time, or collectively, allowing for a detailed analysis. A problematic characteristic of the visualization may be the overwhelming amount of information offered. Titles are given for the selectable filters, however the user must know the significance of the economic variable in order to understand how to read the visualization. Furthermore, only one economy can be analyzed at a time, preventing the user from comparing different economies at once. Apart from these minor shortcomings, we believe the visualization tells a story and delivers information successfully.
NEXT STEPS
With the limited project timeline, there are various additions our team unable to deliver in the visualization, which may be completed in a future project. The relationship between currency and news was something we found intriguing. Our team aggregated various news reports corresponding to major currency fluctuations which we believe may be related. News articles included events such as politics, economics, natural disasters, etc. This was a key part of our research and can be further explored and plotted on the visualization to further strengthen user experience by providing background info to historic events. In regards to the user browsing experience, we believe we can offer further optimized comparison tools. For example, the ability to compare the economies of Europe and China simultaneously. Explanations of the economic filters may also further educate the user, providing context for the data as well as making the visualization easier to understand. Currency Fluctuation: An Insight Into Major Economical Shifts is currently a visualization analyzing and comparing the relationship of currency and economic factors. The visualization and report make no definite claims into the relationships. With further research and analysis, we would like to take the project a step further and make claims about the relationship between a country’s currency and the various economic factors that surround it.
CONCLUSION
With our extensive research into the economic landscape, as well as the stories and events that surrounded the numbers, we gained valuable insight into how currency value is affected by external factors. By analyzing currency fluctuations over a span of ten years, we were able to make connections between the collected data and factors such as GDP, trades, inflation rates, news & events, and stocks to understand why the inconsistencies with the data were occurring. From the moment we chose our focus, we understood that the purpose of the visualization was not to make claims, but rather analyze relationships between the highlighted external factors and the topic. We believe Currency Fluctuation: An Insight Into Major Economic Shifts offers an in-depth analysis into the complex and active systems that are engrained in global economics.
TO VIEW INTERAVTIVE VISUALIZATION PLEASE VISIT: http://currency-fluctuation.herokuapp.com
REFERENCES
1.http://www.investopedia.com/articles/forex/11/swiss-franc-primer.asp?lay out=orig 2.http://www.swissinfo.ch/eng/hard-cash_the-swiss-franc--global-reserve-o r-gourmet-currency-/41100110 3.http://www.worldstopexports.com/chinas-top-10-exports/1952 4.http://www.differencebetween.com/difference-between-import-and-vs-ex port/ 5.http://www.frbsf.org/education/publications/doctor-econ/1999/october/t rade-deficit-import-export-imbalance-currency 6.https://www.boundless.com/economics/textbooks/boundless-economicstextbook/economic-growth-20/productivity-98/impacts-of-technological-c hange-on-productivity-370-12467/ 7. 8. 9.http://www.investopedia.com/university/inflation/inflation1.asp 10.http://www.investopedia.com/ask/answers/199.asp 11.http://www.ons.gov.uk/ons/rel/elmr/explaining-economic-statistics/unde rstanding-gdp-and-how-it-is-measured/sty-understanding-gdp.html 12.http://www.bbc.com/news/business-13200758 13.http://www.investopedia.com/ask/answers/012815/how-does-bull-mark et-affect-economy.asp