Suppose that the international parity conditions all hold and a country has a higher nominal interest rate than the United States
Characterize the country's inflation rate compared to the United States, the country's expected exchange rate change versus the dollar, the country's currency forward premium (or discount) versus the dollar, and the country's real interest rate compared to the U.S. real interest rate.
When all the parity conditions hold, real interest rates are equalized across countries, so the country's real interest rate should equal that of the United States. The country's higher nominal interest rate therefore must reflect a higher expected rate of inflation relative to the United States. Since the parity conditions hold, a higher expected rate of inflation implies that country's currency should be expected to depreciate relative to the dollar, and the currency will trade at a forward discount relative to the dollar.
You might also like to view...
The ten hotels in Ottawa with 5 star ratings were each asked separately to give the federal government a price that it would charge per night for people associated with the federal government staying at their hotel
The 10 hotels then contacted each other and agreed that they would each tell the federal government that the special government room rate would be $110 per night. As a result which of the following statements is TRUE? The hotels A) did nothing illegal as they have the right to discuss their pricing strategies B) are guilty of an offence under the Civil Reviewable Matters section of the Competition Act C) are guilty of abuse of dominant position D) are guilty of bid rigging E) could face penalties of up to 20 years in jail and maximum fines of $10 million
A Cpk index greater than ________ is a capable process, one that generates fewer than 2.7 defects per 1000 at the ±3? level
Fill in the blanks with correct word