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Explain why the exchange rate model based on PPP is a long-run theory.
Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for the reason that it doesn't allow for price rigidities. It assumes that prices are able to adjust right away to maintain full employment as well as PPP.
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Q. What has been learned since 1973 with regard to the experience with floating exchange rate regime? Answer: 1. Monetary policy autonomy: Yes though floating rate didn
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Since the 1990s there has been an increasing number of Regional Trade Arrangements(RTA). According to WTO in 2012 the number of RTA increase 2 fold compared to the 90s to 497. Is r
Q. Discuss studies based on the interest parity conditions. Answer: Generally the formula doesn't hold and isn't a good predictor of future devaluations. Even poorer it
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