Four way equivalence model: Difference between revisions
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* [[International Fisher Effect]] | * [[International Fisher Effect]] | ||
* [[Purchasing power parity]] | * [[Purchasing power parity]] | ||
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[[Category:Identify_and_assess_risks]] |
Revision as of 11:52, 22 February 2018
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:
- Interest rate parity theory - linking interest rates & spot and forward foreign exchange rates.
- The Fisher Effect - linking interest rates with expected inflation rates.
- Expectations theory - forward foreign exchange rates and future out-turn spot foreign exchange rates.
- The International Fisher Effect - interest rate differentials and expected change in spot foreign exchange rates.
- Purchasing power parity theory - inflation rate differentials and expected change in spot foreign exchange rates.