IRP

terabyte · June 1, 2009, 9:48am

does the interest rate parity involve real interest rates or nominal…:S? the uncovered involves nominal…PPP is based on inflation rates and the fisher effect deals with nominal rates being a function of real and expected inflation rates…

bobsters · June 1, 2009, 9:49am

nominal i thought …

terabyte · June 1, 2009, 10:14am

but in that case wouldnt Uncovered IRP and normal IRP hav the same results? dude do u not sleep?

cpk123 · June 1, 2009, 10:22am

yes, but the end results --> IRP predicts the Forward Rate UIRP -> predicts the Expected Spot. Technically the two are supposed to be equal. But usually are not. If PPP holds then this relation would also hold. However - IRP always will hold, UIRP may not.

bobsters · June 1, 2009, 10:36am

terabyte Wrote: ------------------------------------------------------- > dude do u not sleep? haha … i just woke up from 8 hours of sleep

niraj_a · June 1, 2009, 11:03am

me too bobsters and i agree wid cpk’s explanation. nominal is used in both IRP and uncovered.

terabyte · June 1, 2009, 11:21am

nicely put…thanks!

Cubemonkey · June 2, 2009, 1:54am

cpk123 Wrote: ------------------------------------------------------- > yes, but the end results --> IRP predicts the > Forward Rate > UIRP -> predicts the Expected Spot. > > Technically the two are supposed to be equal. But > usually are not. If PPP holds then this relation > would also hold. However - IRP always will hold, > UIRP may not. BUMP because I’ve hated these annoying little topics and cpk cleared it up.