The interest parity condition should be a reasonable approximation for China-U.S. interest and exchange rates but not for Japan-U.S. interest and exchange rates.

Question

Quizplus · Accepted Answer

The interest parity condition can be a reasonable approximation for both China-U.S. and Japan-U.S. interest and exchange rates, as it is a fundamental principle in finance that applies to international interest rates and exchange rates, assuming there are no capital controls and markets are efficient. However, the accuracy of this approximation can vary due to market imperfections, capital controls, and other factors specific to each country pair.

The Interest Parity Condition Should Be a Reasonable Approximation for China-U.S