Business
Business, 06.11.2019 05:31, koss929

Suppose interest parity does not hold exactly, but the true relationship is r=r+(ee - e)/ (e+rho) where rho is a term measuring the differential riskiness of domestic versus foreign deposits. suppose a permanent rise in domestic government spending, by creating the prospect of future government deficits, also raises rho, that is, makes domestic currency deposits more risky. evaluate the policy’s output effects in this situation.

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Suppose interest parity does not hold exactly, but the true relationship is r=r+(ee - e)/ (e+rho) wh...

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