标题: IR, ER linkage [打印本页] 作者: jbaldyga 时间: 2011-7-11 19:58 标题: IR, ER linkage
as per IRP, the country with the higher relative interest rate will expect a depreciation of it's currency (in terms of it's futures price).
however, in Bk 3, capital mkt expectations, EOC 18... they have mentioned in the solutions that the country with the higher relative interest rate (10yr govt rate) will see a strengthening of their currency.
am i missing something here?作者: jmh530 时间: 2011-7-11 19:58
it depends on time period
in short term the country with the higher relative interest rate will see a strengthening of their currency
but in the long run as more money enter to get arbitrage , currency will depraciate to an equilibrium return worldwide作者: Zestt 时间: 2011-7-11 19:58
i hope the question is specific then in terms of the time period they r looking at.
