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| Topic: |
Business
|
| Number of pages / Number of words: |
28 / 7822 |
Essay's paper body
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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General points of the essay
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