Starting from the uncovered interest parity condition, suppose that interest rat

Starting from the uncovered interest parity condition, suppose that interest rates are determined by Taylor rules without persistence, without forward looking, and without interdependence. Suppose that the growth rate of potential output experiences a permanent increase of one percentage point in the home country. Derive analytically the effect on the expected capital gains of holding foreign currency?

Leave a Reply

Your email address will not be published. Required fields are marked *