A SMALL FOREIGN EXCHANGE MARKET WITH A LONG-TERM PEG
INTRODUCTION The extent of financial integration in the modern world, reflected in the magnitude and pervasiveness of financial flows, has served to intensify research on the economic functioning of foreign exchange markets. In the open economy, international financial flows will ensure that interest rate parity is maintained for assets of similar maturities, or that the interest differentials exactly reflect expectations about exchange rate changes, provided there are no frictions and ...
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