Institute for Fiscal Studies and Interest rate parity: Difference between pages

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''UK''.
(IRP).


(IFS).  
This theory describes the expected relationship between [[Spot rate|spot]] and [[Forward forward rate|forward forward exchange rates]], and the [[Interest rate|interest rates]] in the related currency pair.


The IFS was established in 1969 with the principal aim of better informing public debate on economics in order to promote the development of effective fiscal policy.  
Under efficient market conditions the interest rate parity theory predicts that the forward FX rate (available in the market today) should be equal to the spot FX rate, adjusted for the difference in interest rates between the currency pair over the relevant period.


Its research remit covers subjects from personal tax and benefits to education policy, from labour supply to corporate taxation.


 
IRP holds very strongly for actively traded currency pairs, less so for currencies which are not so actively traded.  
The IFS receives funding from a range of sources, including the Economic and Social Research Council, UK Government departments, foundations, the European Research Council, international organisations, companies and other non-profit organisations.




== See also ==
== See also ==
* [[Budget]]
* [[CertFMM]]
* [[Fiscal]]
* [[Covered interest arbitrage]]
* [[Office for Budget Responsibility]]
* [[Efficient market hypothesis]]
* [[Office for National Statistics]]
* [[Foreign exchange]]
* [[Forward forward rate]]
* [[Four way equivalence model]]
* [[Interest rate]]
* [[Spot rate]]


[[Category:The_business_context]]
[[Category:Manage_risks]]
[[Category:Financial_products_and_markets]]

Revision as of 22:52, 10 January 2016

(IRP).

This theory describes the expected relationship between spot and forward forward exchange rates, and the interest rates in the related currency pair.

Under efficient market conditions the interest rate parity theory predicts that the forward FX rate (available in the market today) should be equal to the spot FX rate, adjusted for the difference in interest rates between the currency pair over the relevant period.


IRP holds very strongly for actively traded currency pairs, less so for currencies which are not so actively traded.


See also

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