A textbook condition of international finance breaks down. Economic research identifies the interplay between divergent monetary policies and new financial regulation as the source of the puzzle, and generates concerns about unintended consequences for financing conditions and financial stability.
The breakdown of the covered interest rate parity condition
What’s at stake: a textbook condition of international finance breaks down. Economic research identifies the interplay between divergent monetary policies and new financial regulation as the source of the puzzle, and generates concerns about unintended consequences for financing conditions and financial stability.
What’s the covered interest rate parity (CIP)?
According to the covered interest rate parity (CIP) condition, the