Deviations from the international currency parity relationships may occur because of
A)free capital movements across national boundaries.
B)barriers to cross-border financial flows.
C)perfect rationality of market participants.
D)differences in each country's productive capacity.
E)Basel capital regulations.

Question

Quizplus · Accepted Answer

Barriers to cross-border financial flows can cause deviations from international currency parity relationships because they restrict the free flow of capital, leading to differences in interest rates and exchange rates that would not exist in a perfectly free market.

Deviations from the International Currency Parity Relationships May Occur Because