Open Economy - UIP | Ec2002-macroeconomic

Sarah
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Open Economy - UIP May 9, 2016 17:19:49 GMT

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Post by Sarah on May 9, 2016 17:19:49 GMT

Hi,

I have noticed the book uses a different derivation method and ultimately a different formula of the UIP condition.

While I understand both would be equivalent (given the book sticks to the nominal exchange rate e and your slides use e*), I was wondering which one you would recommend memorising for the exam?

Thank you in advance!

Oliver
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Posts: 224

Open Economy - UIP May 9, 2016 21:59:45 GMT

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Post by Oliver on May 9, 2016 21:59:45 GMT

Hi,

I wouldn't recommend memorizing anything by rote. I'd recommend you understand what the UIP condition is, so that you can always write it down. The UIP condition states that an investor will be indifferent between investing in a home bond and a foreign bond. How exactly you write it down is up to you as long as you define variables carefully in the exam. i.e. if you write e, tell us what e is.

Best
Oliver

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Open Economy - UIP

Post by Sarah on May 9, 2016 17:19:49 GMT

Post by Oliver on May 9, 2016 21:59:45 GMT

Post by LesDozy on Oct 1, 2019 17:40:49 GMT

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