The condition which states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called

Question

Quizplus · Accepted Answer

This is known as the interest parity condition, where investors will not be motivated to shift capital between countries when the expected return on investment is equalized by the expected exchange rate change. The purchasing power parity condition relates to the difference in price levels between countries, while money neutrality and the theory of foreign capital mobility are related but not directly relevant to this equation.

The Condition Which States That the Domestic Interest Rate Equals