=+13. Imagine that everyone in the world pays a tax of percent on interest earnings and on

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=+13. Imagine that everyone in the world pays a tax of percent on interest earnings and on any capital gains due to exchange rate changes. How would such a tax alter the analysis of the interest parity condition? How does your answer change if the tax applies to interest earnings but not to capital gains, which are untaxed?

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International Economics

ISBN: 9780132146654

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz

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