Discuss the implications of the interest rate parity

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Reference no: EM13264537

QUESTIONS

1. Give a full definition of arbitrage.

2. Discuss the implications of the interest rate parity for the exchange rate determination.

3. Explain the conditions under which the forward exchange rate will be an unbiased predictor of the future spot exchange rate.

4. Explain the purchasing power parity, both the absolute and relative versions. What causes the deviations from the purchasing power parity?

5. Discuss the implications of the deviations from the purchasing power parity for countries' competitive positions in the world market.

6. Explain and derive the international Fisher effect.

7. Researchers found that it is very difficult to forecast the future exchange rates more accurately than the forward exchange rate or the current spot exchange rate. How would you interpret this finding?

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Reference no: EM13264537

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