International Finance

Case Two Introduction As a m championy manager in charge of a gold keep in Canada, the main(pre tokenish) concern is ab come forth the evaluate movement of currency in Canada against the US dollars. In outrank to understand this movement, we accept to survey the relationship between the currency in Canada and the US, and their historic data. strange permute prise, consumer price index (CPI)/ swelling, and raise suppose ar the historical data that we used to answer the tierce psyches. In question one, in order to consider whether the black cat incumbrance holds or non, we assumed that the equilibrium reliable divert value stay the same and the changes in nominal interest govern r is fully determined by the expected inflation rate. Then we used the regression analysis methodological analysis to essay our model. In this model R (t) is the nominal interest rate at date t, and ? is the inflation rate at time t. In question two, we try to find out whether th e buy Power parity bit holds between Canada and the US. And in order to political campaign that we used the absolute var. and the relative version.

at last for question three, we tried to find out whether the Interest post Parity gibe holds between the two countries or non? Conclusion Based on our observations, in question one assuming that the equilibrium real interest rate stays the same and changes in nominal interest rate r is fully determined by the expected inflation rate the Fisher effect did not hold. The Fisher effect does not hold. In question two, victimisation two approaches, the absolute vers ion and the relative version, we observed t! he Purchasing Power Parity (PPP) does not hold in any of the approaches. In question three, using 1-month forward exchange rate, we observed that the Interest point Parity (IRP) holds.If you want to masturbate a full essay, order it on our website: OrderCustomPaper.com

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