The Law of One Price (LOOP). Ikea has stores in the United States, Canada, and Japan....

 

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The Law of One Price (LOOP). Ikea has stores in the United States, Canada, and Japan. In all of them, they sell the LACK table. The price in the United States is 10 US dollars (USD), in Canada 10 Canadian dollars (CAD), and in Japan 2,000 Yen. Nominal exchange rates are ECAD/USD = 1.5 and EYEN/USD = 110, for the Canadian dollar and Japanese Yen, respectively. a. Does LOOP hold for the LACK table across Japan, Canada, and the United States? Are the Canadian dollar and Japanese Yen under- or over-valued with respect to the US dollar according to LOOP? Show your calculations. b. State TWO reasons why LOOP may not hold. We read TWO articles in class about removing frictions that impeded LOOP to hold. Choose one to answer the following questions. d. Describe briefly the relevant source of variation for the empirical analysis. Be precise. e. State the main (empirical) result that leads the author(s) to conclude that adherence to LOOP is stronger when the friction under study is removed. Be precise. For the toolbar press ALT+F10 (PCLor ALT+EN+F10 (Mac) The Law of One Price (LOOP). Ikea has stores in the United States, Canada, and Japan. In all of them, they sell the LACK table. The price in the United States is 10 US dollars (USD), in Canada 10 Canadian dollars (CAD), and in Japan 2,000 Yen. Nominal exchange rates are ECAD/USD = 1.5 and EYEN/USD = 110, for the Canadian dollar and Japanese Yen, respectively. a. Does LOOP hold for the LACK table across Japan, Canada, and the United States? Are the Canadian dollar and Japanese Yen under- or over-valued with respect to the US dollar according to LOOP? Show your calculations. b. State TWO reasons why LOOP may not hold. We read TWO articles in class about removing frictions that impeded LOOP to hold. Choose one to answer the following questions. d. Describe briefly the relevant source of variation for the empirical analysis. Be precise. e. State the main (empirical) result that leads the author(s) to conclude that adherence to LOOP is stronger when the friction under study is removed. Be precise. For the toolbar press ALT+F10 (PCLor ALT+EN+F10 (Mac)

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a LOOP does not hold for the LACK table across Japan Canada and the United States According to LOOP ... View the full answer