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Background Note
| HBS Case Collection
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1994
(Revised from original 1988 version)
Note on Fundamental Parity Conditions
by
W. Carl Kester and Richard P. Melnick
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Abstract
Provides a simple framework for analyzing expected exchange rate movements. Basic parity and equilibrium conditions are presented including purchasing power parity, forward parity, interest rate parity, the domestic Fisher effect, and the international Fisher effect (Fisher open). Empirical evidence about these conditions are discussed. References are provided.
Keywords: Currency Exchange Rate;
Situation or Environment;
Citation:
Kester, W. Carl, and Richard P. Melnick. "Note on Fundamental Parity Conditions." Harvard Business School Background Note 288-016, November 1994. (Revised from original February 1988 version.)