Theories of interest rate determination, Financial Econometrics

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Question 1:

(a) Describe clearly the main theories of interest rate determination.

(b) Critically assess the relationship between interest rate and Money supply.

Question 2:

There is now a consensus among economists and central bankers that the only long-run effect a monetary authority will have on an economy is to evaluate the sustained, or trend, rate of inflation. That rate will result from the rate at which the monetary authority injects money into the economy.

Critically show the importance of Central Bank Independence for macroeconomic performance?


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