Us RFR 4.8
US Inf 2.3
Brazil RFR 8.8
Brazil Inf 6.3
spot exchange rate 2.3844 brazil per dollar
Baroque expects the brazil currency to decline by 5%
Which Relationship explains this
Interest Rate Parity
Purchasing Parity
Uncovered Interest Parity
The answer is C
If there is the same differential between inflation rates and interest rates, like in above, don’t purchasing power parity and uncovered parity come up with the same E(s)?
Can someone shed some light on this.作者: luda002 时间: 2013-4-12 22:32
PPP does hold. Uncovered interest rate parity did too. There explanation was PPP only showed a decline of 4% which is not 5%.
So i’m like ok, i go and calculate UIRP and that is 4%. (there is like a a .002 difference in E(s))
