GLOBE International Finance Theory & Policy
by Steven M. Suranovic Chapter 20
Interest Rate Parity


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Table of Contents

20-1 The Interest Rate Parity Condition
20-2 Numerical Examples Using the Rate of Return Formula
20-3 Asset Approach to Exchange Rate Determination
20-4 The Effect of Changes in US Interest Rates on the Spot Exchange Rate
20-5 The Effect of Changes in German Interest Rates on the Spot Exchange Rate
20-6 The Effect of Changes in the Expected Exchange Rate on the Spot Exchange Rate
20-7 FOREX Equilibrium with the Rate of Return Diagram
20-8 Exchange Rate Equilibrium Stories using the RoR Diagram
20-9 Exchange Rate Effects of Changes in US Interest Rates using a RoR Diagram
20-10 Exchange Rate Effects of Changes in Foreign Interest Rates using a RoR Diagram
20-11 Exchange Rate Effects of Changes in the Expected Exchange Rate using a RoR Diagram

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Related Links
  • Glossary with IRP Definition
    this page provides the interest rate parity condition when interest is compounded annually and continuously. In the text above the simple interest formula is used.
  • Analysis of Canadian $ Exchange Rate
    this page, by Prof. Antweiler of UBC, provides provides an analysis of the forward premium or forward discount of the US Dollar (USD) from the perspective of the Canadian Dollar (CAD). It is updated weekly.


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©1997-2005 Steven M. Suranovic, ALL RIGHTS RESERVED
Last Updated on 5/14/05
HOW TO CITE THIS PAGE
Suranovic, Steven, "International Finance Theory and Policy: Interest Rate Parity," The International Economics Study Center, © 1997-2005, http://internationalecon.com/v1.0/Finance/ch20/ch20.html.