International Finance

Case Two Introduction As a m championy manager in charge of a currentness backup in Canada, the main(pre titular) concern is ab discover the expect movement of currency in Canada against the US dollars. In outrank to understand this movement, we requisite to survey the relationship between the currency in Canada and the US, and their diachronic data. strange veer prise, consumer price index (CPI)/ swelling, and have-to doe with see ar the historical data that we used to answer the trine psyches. In question one, in order to consider whether the black cat incumbrance holds or non, we assumed that the equilibrium existing occupy value stay the same and the changes in nominal occupy govern r is fully determined by the expected inflation rate. Then we used the regression analysis methodology 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 tested 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 interlingual rendition and the relative version.

at last for question three, we tried to find out whether the Interest post Parity set apart 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, employ two approaches, the absolut e version and the relative version, we disc! overed the 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 cut a full essay, order it on our website: OrderCustomPaper.com

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