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Tests of Three Parity Conditions

Richard C. Marston

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Description:Two explanations are given for why nominal or real returns differ across currencies: foreign exchange risk premia and systematic (rational) forecast errors. This study reexamines three parity conditions in international finance, uncovered interest parity, purchasing power parity, and real interest parity, to determine the relative importance of these two factors. The study develops joint tests of the three parity conditions by relating nominal and real interest differentials and inflation differentials to the same set of variables currently known to investors. The study tests parameter restrictions based on knowing that risk premiums only affect nominal and real interest differentials, but not inflation differentials, while systematic errors in forecasting exchange rates only affect nominal interest differentials and inflation differentials, but not real interest differentials.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Tests of Three Parity Conditions. To get started finding Tests of Three Parity Conditions, you are right to find our website which has a comprehensive collection of manuals listed.
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Pages: 52

Format: PDF, EPUB & Kindle Edition

Publisher: —

Release: 1994

ISBN: F0eyAAAAIAAJ

Description: Two explanations are given for why nominal or real returns differ across currencies: foreign exchange risk premia and systematic (rational) forecast errors. This study reexamines three parity conditions in international finance, uncovered interest parity, purchasing power parity, and real interest parity, to determine the relative importance of these two factors. The study develops joint tests of the three parity conditions by relating nominal and real interest differentials and inflation differentials to the same set of variables currently known to investors. The study tests parameter restrictions based on knowing that risk premiums only affect nominal and real interest differentials, but not inflation differentials, while systematic errors in forecasting exchange rates only affect nominal interest differentials and inflation differentials, but not real interest differentials.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Tests of Three Parity Conditions. To get started finding Tests of Three Parity Conditions, you are right to find our website which has a comprehensive collection of manuals listed.
Our library is the biggest of these that have literally hundreds of thousands of different products represented.

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Tests of Three Parity Conditions

Tests of Three Parity Conditions

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