Write down the uncovered interest rate parity condition. Explain, in your own words, what it means...

 

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Write down the uncovered interest rate parity condition. Explain, in your own words, what it means intuitively. (5 points) Suppose we were to run a Fama regression" of the form log S log S = a+ (, i)+&+1 What estimates for a and should we expect based on the interest rate parity condition above? Explain. (5 points) What kind of results do researchers typically find when they run this regression on historical data? Based on these empirical findings, should we expect nominal exchange rates of countries with high nominal interest rates to appreciate or depreciate? (5 points) Provide two reasons why UIP might not hold in the data. Write down the uncovered interest rate parity condition. Explain, in your own words, what it means intuitively. (5 points) Suppose we were to run a Fama regression" of the form log S log S = a+ (, i)+&+1 What estimates for a and should we expect based on the interest rate parity condition above? Explain. (5 points) What kind of results do researchers typically find when they run this regression on historical data? Based on these empirical findings, should we expect nominal exchange rates of countries with high nominal interest rates to appreciate or depreciate? (5 points) Provide two reasons why UIP might not hold in the data.

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Researchers find that UIP does not hold in historical data indicating that nominal ... View the full answer