Four way equivalence model: Difference between revisions
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A model that proposes a number of related conceptual linkages between differences in: | A model that proposes a number of related conceptual linkages between differences in: | ||
(i) Interest rates; | |||
(ii) Spot and forward foreign exchange rates; | |||
(iii) Expected inflation rates; and | |||
(iv) The expected change in spot foreign exchange rates. | |||
The related individual linking theories are: | The related individual linking theories are: | ||
(1) Interest rate parity theory - linking interest rates & spot and forward foreign exchange rates. | |||
(2) The Fisher Effect - linking interest rates with expected inflation rates. | |||
(3) Expectations theory - forward foreign exchange rates and future out-turn spot foreign exchange rates. | |||
(4) The International Fisher Effect - interest rate differentials and expected change in spot foreign exchange rates. | |||
(5) Purchasing power parity theory - inflation rate differentials and expected change in spot foreign exchange rates. | |||
== See also == | == See also == | ||
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* [[International Fisher Effect]] | * [[International Fisher Effect]] | ||
* [[Purchasing power parity]] | * [[Purchasing power parity]] | ||
Revision as of 14:29, 28 May 2013
A model that proposes a number of related conceptual linkages between differences in:
(i) Interest rates; (ii) Spot and forward foreign exchange rates; (iii) Expected inflation rates; and (iv) The expected change in spot foreign exchange rates.
The related individual linking theories are:
(1) Interest rate parity theory - linking interest rates & spot and forward foreign exchange rates. (2) The Fisher Effect - linking interest rates with expected inflation rates. (3) Expectations theory - forward foreign exchange rates and future out-turn spot foreign exchange rates. (4) The International Fisher Effect - interest rate differentials and expected change in spot foreign exchange rates. (5) Purchasing power parity theory - inflation rate differentials and expected change in spot foreign exchange rates.
