Does interest rate parity hold? If not, why not? Will the Canadian dollar depreciate further or appreciate

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Does interest rate parity hold? If not, why not?

Will the Canadian dollar depreciate further or appreciate against the U.S. dollar if the Fed raises the interest rate while the Canadian interest rate remains at 0.17 percent a year?

The price of a Big Mac is $C6.88 in Toronto and $5.71 in New York. The exchange rate is $C1.36 per U.S. dollar. The 3month interest rate is 0.17 percent in Canada and 0.10 percent in the United States.

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Economics

ISBN: 9781292433639

14th Global Edition

Authors: Michael Parkin

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