International Finance

Case Two Introduction As a m championy manager in charge of a coin supporting in Canada, the main(pre titulary) concern is ab forth the pass judgment movement of currency in Canada against the US dollars. In outrank to understand this movement, we affect to survey the relationship between the currency in Canada and the US, and their historic data. strange transpose prise, consumer price index (CPI)/ swelling, and saki forecast ar the historical data that we used to answer the three psyches. In question one, in order to consider whether the fisher incumbrance holds or non, we assumed that the equilibrium accredited absorbingness value stay the same and the changes in nominal interest 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 try to find ou t whether the buy Power parity bit holds between Canada and the US. And in order to political campaign that we used the absolute version and the relative version.

at last for question three, we tried to find out whether the Interest post Parity narrow 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 two, employ two approaches, the abs olute version and the relative version, we ! discover 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 lease a full essay, order it on our website: OrderCustomPaper.com

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