Exchange Rates, Interest Rates and Commodity Prices

Exchange Rates, Interest Rates and Commodity Prices

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This book explores the key issues relating to links between exchange rate instability and domestic inflation, including real exchange rate and interest rate manifestations, and the co-variability of exchange rates and commodity prices. The common theme throughout is the behavior of asset prices and interest rates in international markets.

A number of interrelated questions regarding the interactions of exchange rates, interest rates and commodity prices are posed:

• Why is purchasing power parity invariably controversial?

• Despite overwhelming evidence that sterilized central bank interventions are impotent, why do major industrialized countries (such as the G-7) continue to look for accords to stem exchange rate volatility?

• Why are the currencies of resource-based economies depreciating when the commodity prices are holding up?

• Has the link between exchange rates and commodity prices collapsed?

• In a world of increasing globalization, why are interest rate movements so poorly correlated across countries?

New insights to these and other fundamental questions in international finance are provided by way of empirical analyses. While there remains much that is little understood, the conclusions concerning the validity of the theory of purchasing power parity are becoming more and more reliable.

This book is a must-read for graduate students, researchers and teachers interested in finance, economics or business. Exchange Rates, Interest Rates andCommodity Prices will also appeal to policymakers.