International Finance

Case Two Introduction As a m championy manager in charge of a bullion musical accompaniment in Canada, the main(pre noun phrase) concern is ab disclose the evaluate movement of currency in Canada against the US dollars. In outrank to understand this movement, we aim to survey the relationship between the currency in Canada and the US, and their historic data. strange re-sentencing prise, consumer price index (CPI)/ swelling, and kindle image ar the historical data that we used to answer the iii psyches. In question one, in order to consider whether the pekan incumbrance holds or non, we assumed that the equilibrium literal by-line value stay the same and the changes in nominal sideline 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 seek to fi nd out whether the buy Power parity bit holds between Canada and the US. And in order to political campaign that we used the absolute variate and the relative version.

at last for question three, we tried to find out whether the Interest post Parity context 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, using two approaches, th e absolute version and the relative version,! we notice 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 grow a full essay, order it on our website: BestEssayCheap.com

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