Suppose that a U.S 1-year bond has a yield of 1.520% while one from China has a yield of 2.165%. Meanwhile, over the past year, the U.S has seen inflation of 7.9% while China has had 9.1% inflation. Give two possible explanations for this seeming violation of real interest parity.

Suppose that a U.S 1-year bond has a yield of 1.520% while one from China has a yield of 2.165%. Meanwhile, over the past year, the U.S has seen inflation of 7.9% while China has had 9.1% inflation. Give two possible explanations for this seeming violation of real interest parity.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter36: Exchange Rates And Financial Links Between Countries

Section: Chapter Questions

Problem 18E

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