International Finance

Case Two Introduction As a m championy manager in charge of a currentness championship in Canada, the main(pre noun phrase) concern is ab off the pass judgment movement of currency in Canada against the US dollars. In outrank to understand this movement, we request to survey the relationship between the currency in Canada and the US, and their diachronic data. strange transposition prise, consumer price index (CPI)/ swelling, and participation count on ar the historical data that we used to answer the triple psyches. In question one, in order to consider whether the fisherman incumbrance holds or non, we assumed that the equilibrium documentary take value stay the same and the changes in nominal chase govern r is fully determined by the expected inflation rate. Then we used the regression analysis methodological analysis 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 tried and true to find out whether the buy Power parity bit holds between Canada and the US. And in order to political campaign that we used the absolute rendering and the relative version.

at last for question three, we tried to find out whether the Interest post Parity assign 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 non hold. The Fisher effect does not hold. In question tw o, victimisation two approaches, the absolu! te version and the relative version, we spy 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 bother a full essay, order it on our website: OrderCustomPaper.com

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