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Co-determination of exchange rate and interest rate

62 ratings | 12220 views
This clip shows how interest rates -- determined in national financial markets -- and exchange rates -- determined in the foreign exchange market -- interact. When the central bank changes the interest rate, it affects the no-arbitrage condition in the foreign exchange market: Given a constant "fundamental" expected exchange rate, the current exchange rate depreciates (rises) following a decrease of the domestic interest rate. Vice versa, the current exchange rate appreciates (falls) following an increase in the domestic interest rate.
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Text Comments (12)
yewut (5 months ago)
thank you!
yewut (5 months ago)
thank you!
Ranju Ramesan (8 months ago)
awesome explanation...thnks a lott...
Tnbeazy (9 months ago)
yah trick yah
richard boachie (10 months ago)
Good stuffs. Thank you
Ania Schneider (2 years ago)
You saved me so many times.
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Rudiger von Arnim (5 years ago)
This video was made on a tablet PC, background is Microsoft Note, written with a stylus pen ... very simple.
bdeely (5 years ago)
Hello. Could you tell me what software/hardware you're using for writing these notes in the videos? Are you using a pen/pad? What's the name of the software? Thanks!
Agreed: An example with numbers clarifies further. I might do that at some point. Thanks.
Radowid Eilhart (6 years ago)
This is great video but this information is all economics books. There is a lack of examples of real numbers

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