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Global Economy, Chapter 4 Exchange Rates II: The Asset Approach in the…
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The price of the asset is the spot exchange rate, the price of one unit of foreign exchange
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the price level is sticky, the nominal interest rate i is fully flexible
controls on arbitrage. If capital controls are imposed, there is no arbitrage
expectations and arbitrage operate in a variety of ways to determine exchange rates in both the short run and the long run
