The parity condition is important in international finance because when they hold, they imply “POINT OF INDIFFERENCE” between two alternative financial choices. When the parity condition is invalid, indicate market forces favoring one financial alternative one another. Empirical evidence on the international parity conditions is important, because there will be an implication for the decision maker when the parity condition hold and when they do not hold. The parity condition becomes most intriguing when it is false.
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