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Sir, if 1 country has higher rate of inflation than another then its currency will depreciate over time. (PPPT). Correct?
Similarly, if 1 country has higher rate of interest than another then its currency will depreciate over time. (IRPT). Correct?
In case of D19 Q1 c , in examiner solution it is mentioned that in the case of Okan Co’s subsidiary company, economic risk may have occurred because interest rates have been kept at a high level. High interest rates will be attractive to international investors, as they can get higher returns and may lead to the Y$ becoming stronger relative to other currencies.
Sir here how Y$ will become stronger? Infact, it should be depreciated na according to the above IRPT?
In theory, your first two statements are correct.
However, in practice there are many factors that affect exchange rates – they do not react always as per the formulas.