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International Parity Conditions

In: The Economics of Foreign Exchange and Global Finance

Author

Listed:
  • Peijie Wang

    (University of Hull, Business School)

Abstract

International trade or exchange of goods and services across borders gives rise to international settlement with payments being made in different currencies. Discrepancies may arise as a consequence when the settlement is executed in one currency as against the other currency. Moreover, economic conditions and changes in economic conditions in different countries may take effect on the value of goods measured in different currencies and the relative values and opportunity costs of these currencies. International parities are concerned with the relationships between the values of two or more currencies and the respective economic conditions in these countries, and the way in which these relationships respond to the changing economic conditions in these countries. International parities are important since they establish relative currency values and their evolution in terms of economic circumstances, and cross border arbitrage may be possible when they are violated.

Suggested Citation

  • Peijie Wang, 2009. "International Parity Conditions," Springer Books, in: The Economics of Foreign Exchange and Global Finance, chapter 3, pages 1-32, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-00100-0_3
    DOI: 10.1007/978-3-642-00100-0_3
    as

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