Derive the formulas for purchasing power parity

Reference no: EM13241823

Derive the formulas for Purchasing power parity and Interest rate Parity in relative form. Suppose that the return on domestic bonds held by foreigners in country i are subsidized at the rate s and that returns on domestic bonds held by residents of country j are taxed at the rate ?. Write down the interest parity condition (between countries i and j) as viewed by an investor in country k.

Reference no: EM13241823

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