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John Moffat.
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ilham9089
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Hi sir, can you please explain this?
John Moffat
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The Fisher formula shows how, in theory, interest rates and inflation rates move up and down together.
Purchasing power parity explains how, in theory, future spot exchange rates are determined by the relative inflation rates.
Interest rate parity explains how futures prices are determined by the relative interest rates.
In theory therefore the future spot rate should equal the forward rate.
I do explain each of these in my lectures.
ilham9089
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