International Economics, 10e (Krugman/Obstfeld/Melitz)
Chapter 14 Exchange Rates and the Foreign Exchange Market: An Asset Approach
14.3 The Demand for Foreign Currency Assets
17) Determine for each, whether the interest parity condition holds or not, if
= 1.10
14.4 Equilibrium in the Foreign Exchange Market
3) What is the interest parity condition?
4) Explain why the interest parity condition must hold if the foreign exchange market is in
equilibrium.
1