Does interest rate parity imply that interest rates are the same in all countries?

Category:

Does interest rate parity imply that interest rates are the same in all countries?

0
0

Does interest rate parity imply that interest rates are the same in all countries?

Explanation & AnswerSolution by a verified expert

Explanation

Interest rate parity equalizes the interest rates from country to country. When a difference occurs, the currency with the higher interest rate is expected to depreciate and the currency with the lower interest rate will appreciate. The economic result is that the interest received will end up being the same from country to country.

Verified Answer

Interest rate parity implies that any difference in interest rates between currencies are smoothed out by differences in exchange rates, implying that rates are essentially the same.

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.


Get Help With Your Assignments

Place your order now and get a quality plagiarism-free paper via email.

Write My Paper For Me