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Exchange Rate and Parity Conditions

In: International Financial Transactions and Exchange Rates

Author

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  • John N. Kallianiotis

Abstract

The international parity conditions are core financial theories relating to the exchange rate determination. The theories link exchange rates, prices, and interest rates between nations and are considered unique to the field of international finance, especially the interest rate parity (IRP) theory. While the theories do not always hold compared to what we observe in the real world, they are necessary and comprise pivotal knowledge to understand international business finance (international trade, international investment, international capital movements, international arbitrage, and speculation). Thus, the exchange rate has specific relation (equilibria) to a set of economic fundamentals that are called international parity conditions.

Suggested Citation

  • John N. Kallianiotis, 2013. "Exchange Rate and Parity Conditions," Palgrave Macmillan Books, in: International Financial Transactions and Exchange Rates, chapter 0, pages 41-96, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-35693-2_2
    DOI: 10.1057/9781137356932_2
    as

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