For developed countries, such as Western Europe, the interest rate parity theory provides a useful framework for estimating forward currency exchange rates (i.e., future spot exchange rates).

Question

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The interest rate parity theory is widely used to estimate forward currency exchange rates for developed countries such as Western Europe. Under this theory, the forward exchange rate should reflect the interest rate differential between two currencies, providing a useful framework for predicting future spot exchange rates.

For Developed Countries, Such as Western Europe, the Interest Rate