with so many contradicting theories, what are we supposed to answer really?
One example is that the interest differentials and expectations about the future exchange rate will shift demand and supply curves and most likely it will result in appreciation of the currency whose interest rate is higher.
However, if we look at IRP formula, increased interest rate will result in depreciation of that currency.
Will they most likely tell us in the exam to assume IRP or PPP for the question?
