Incomplete exchange rate pass-through is one reason that a country’s real effective exchange rate can deviate for lengthy periods from its purchasing power equilibrium level of 100. What is meant by the term exchange rate pass-through?
Answer to relevant QuestionsDefine the Fisher effect. To what extent do empirical tests confirm that the Fisher effect exists in practice? The value of an option is stated to be the sum of its intrinsic value and its time value. Explain what is meant by these terms. A newspaper shows the following prices for the previous day’s trading in the U.S. dollar-euro currency futures: Month December Open: ............... 0.9124 Settlement: ............. 0.9136 Change: ...Swings in foreign direct investment flows into and out of emerging markets contribute to exchange rate volatility. Describe one concrete historical example of this phenomenon during the last 10 years. Explain the meaning of “cross-rate consistency” as used by MNEs. How do MNEs use a check of cross-rate consistency in practice?
Post your question