Question

Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?

A. The impact of investor psychology on short-run exchange rate movements

B. The strong relationship between inflation rates and interest rates

C. The impact of interest rates and short-term exchange rate movements

D. The strong relationship between interest rate differentials and subsequent changes in spot exchange rates

E. Government intervention in cross-border trade that violates the assumption of efficient markets

Answer

This answer is hidden. It contains 377 characters.