Changes in market expectations have their greatest impact on exchange-rate changes over the long run as opposed to the short run.

Question

Quizplus · Accepted Answer

Changes in market expectations can have immediate effects on exchange rates in the short run due to speculation and rapid adjustments in investment flows, whereas long-run exchange rate changes are more influenced by fundamental economic factors such as inflation rates, interest rates, and economic growth.

Changes in Market Expectations Have Their Greatest Impact on Exchange-Rate