Deviations from purchasing power parity and capital flows

Article Abstract:

A model was constructed to determine the effects of disparate prices of investments on investment portfolio decisions and capital movement using a two country intertemporal model having complete financial markets. The disparate prices of investments between two countries affect purchasing power parity. Since no model has ever taken this into account, it is the purpose of the analysis to determine such a relationship. The relationship between volume of capital flows and the deviation of the puchasing power parity is presented as well as the latter's relationship with interest rate.

Models, Foreign investments, Capital movements, Purchasing power

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Policy fundamentals, interest rates differential, and expected devaluation in the presence of an active crawling peg system

Article Abstract:

The tablita system of Southern Cone economies was examined. A model was constructed to quantify the interest rate differential between domestic and foreign currency after adjusting for devaluation in the exchange rate. The tablita system in the Southern Cone economies failed because the rate of devaluation in the tablita was an inaccurate descriptor of the expectations of devaluation. Additional assessments of the Southern Cone economies are presented.

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The use of technical analysis in the foreign exchange market

Article Abstract:

The results of a questionnaire concerning the use of technical analysis in the foreign exchange department are presented. It was found that 90% of the respondents considered technical advice in forming exchange rate expectations. The questionnaire was conducted on behalf of the Economics Division of the Bank of England.

United Kingdom, Economic aspects, Foreign exchange market

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