International Parity Conditions

Peijie Wang ()
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Peijie Wang: University of Hull, Business School

Chapter 3 in The Economics of Foreign Exchange and Global Finance, 2009, pp 1-32 from Springer

Abstract: International trade or exchange of goods and services across borders gives rise to international settlement with payments being made in different currencies. Discrepancies may arise as a consequence when the settlement is executed in one currency as against the other currency. Moreover, economic conditions and changes in economic conditions in different countries may take effect on the value of goods measured in different currencies and the relative values and opportunity costs of these currencies. International parities are concerned with the relationships between the values of two or more currencies and the respective economic conditions in these countries, and the way in which these relationships respond to the changing economic conditions in these countries. International parities are important since they establish relative currency values and their evolution in terms of economic circumstances, and cross border arbitrage may be possible when they are violated.

Keywords: Exchange Rate; Interest Rate; Real Exchange Rate; Purchase Power Parity; Nominal Interest Rate (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-00100-0_3

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DOI: 10.1007/978-3-642-00100-0_3

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