## Exchange and inflation rates, Financial Econometrics

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The Gujistan dollar until January 1st 2009 was pegged to the USA dollar. As at 31st December 2008, the official spot rate between the two currencies was G\$0.6147 = US\$1, while the unofficial (parallel or black market) rate, which was a more accurate reflection of the value of the currency, was G\$1.1500 = US\$1. The USA dollar rate to the British pound then was \$1.6700 = £1.

The government of Gujistan recently accepted its Central Bank's recommendation to dismantle all forms of exchange rate control in the country and also allow its currency to float freely. However there is yet to be an active market for the currency among international banks, and they are reluctant to quote forward rates for the currency at the moment.

Inflation rate in the UK is expected to remain stable at 2.5 percent per annum for the foreseeable future. The inflation rate in Gujistan in 2009 was 20 percent but this expected to decline to 15 percent in 2010, 13 percent in 2011, and subsequently stabilize at 10 percent for the foreseeable future.

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