Purchasing Power Parity and Interest Rate Parity
Purchasing Power Parity and Interest Rate Parity
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Tunay Sabri Yüksel · External communityPost link
External question — Economics Stack Exchange
Author: Tunay Sabri Yüksel
Original post: https://economics.stackexchange.com/questions/59603
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
We know that both Purchasing Power Parity and Interest Rate Parity conditions do not hold in the short run. However, there are several works provided that they can hold in the long run. I am curious whether is it possible to observe that while one of them holds the other one does not hold. I know they are two separate things; while in the deviations from IRP one can have arbitrage possibilities, for the PPP it is hard to say the same thing. But they point out the same thing, which is the exchange rate.
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Quoted from Forex.com.bd-Editorial External question — Economics Stack Exchange Author: Tunay Sabri Yüksel Source score (net votes, not local likes): 1 Original post: https://economics.stackexchange.com/questions/59603 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. We know that both Purchasing Power Parity and Interest Rate Parity conditions do not hold in the short run. However, there are several works provided that they can hold in the long run. I am curious whether is it possible to observe that while one of them holds the other one does not hold. I know they are two separate things; while in the deviations from IRP one can have arbitrage possibilities, for the PPP it is hard to say the same thing. But they point out the same thing, which is the exchange rate.
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