PPP holds in the long term IRP holds in the short term What about URIP (uncovered interest rate parity)? International Fisher’s relations?
FSAdummy Wrote: ------------------------------------------------------- > PPP holds in the long term Not a requirement, but empirical data show it does so. > > IRP holds in the short term Covered Interest Rate Parity should hold for all maturities by definition. > > What about > > URIP (uncovered interest rate parity)? It the expected sport rate for a maturity comes true, it does. But not a requirement as covered IRP is. > > International Fisher’s relations? It simply says that interest rate differential between two countries should equate the countries’ inflation rate differentials. Not a requirement again, because inflation rates may deviate from what the int. fisher theory suggests and real F/x rate may change accordingly.