Economics · International Finance
The Interest Rate Parity (IRP) condition states that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Nominal interest rates are equalized automatically without currency risk
- 2Central banks must maintain equal interest rates across countries
- 3Higher interest rates always lead to capital outflows in the long run
- 4The interest rate differential between two countries equals the expected change in exchange rates✓
Correct answer
The interest rate differential between two countries equals the expected change in exchange rates
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