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Essay's paper info
Topic: Business
Number of pages / Number of words: 28 / 7822
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However, although the monetary models have proved somewhat successful in explaining

exchange rate behaviour, they have also encountered many problems. In particular, many of the

cointegrating relationships have taken on incorrect signs when compared to theoretical models

(McNown and Wallace (1994))...


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Rogoff (1996) for a survey)1 and forecasts based on the

PPP condition alone, have provided mixed results (see for instance Fritsche and Wallace (1997)

among others).

The PPP condition has its roots in the goods market. Another central parity condition for the exchange

rate that plays a crucial role in capital market models is uncovered interest parity (UIP)...


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