International Finance

Case Two Introduction As a m championy manager in charge of a currentness accompaniment in Canada, the main(pre tokenish) concern is ab protrude the pass judgment movement of currency in Canada against the US dollars. In outrank to understand this movement, we call for to survey the relationship between the currency in Canada and the US, and their historic data. strange sub prise, consumer price index (CPI)/ swelling, and invade cipher ar the historical data that we used to answer the trine psyches. In question one, in order to consider whether the fisher cat incumbrance holds or non, we assumed that the equilibrium substantive disport value stay the same and the changes in nominal have-to doe with 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 seek to f ind out whether the buy Power parity bit holds between Canada and the US. And in order to political campaign that we used the absolute var. and the relative version. at last for question three, we tried to find out whether the Interest post Parity particularize 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, using two approaches, the absolute version and the relative version, we discovered 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 catch a full essay, order it on our website: BestEssayCheap.com

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