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In the short run the interest rate parity model is considered to be important in determining the expectations about future currency changes and thereby the forward rate. Discuss this model. Select a foreign currency and see if you can find out the expected future exchange rate for 1 year based on interest rate differentials and compare it to the one year market forward rate.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M948054

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