Exchange Rate and Parity Conditions

John N. Kallianiotis

Chapter Chapter 2 in International Financial Transactions and Exchange Rates, 2013, pp 41-96 from Palgrave Macmillan

Abstract: Abstract The international parity conditions are core financial theories relating to the exchange rate determination. The theories link exchange rates, prices, and interest rates between nations and are considered unique to the field of international finance, especially the interest rate parity (IRP) theory. While the theories do not always hold compared to what we observe in the real world, they are necessary and comprise pivotal knowledge to understand international business finance (international trade, international investment, international capital movements, international arbitrage, and speculation). Thus, the exchange rate has specific relation (equilibria) to a set of economic fundamentals that are called international parity conditions.

Keywords: Exchange Rate; Interest Rate; Real Exchange Rate; Purchasing Power Parity; Foreign Exchange Market (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-35693-2_2

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DOI: 10.1057/9781137356932_2

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