What Makes Currencies Move?
A popular currency pair might fluctuate in price 18,000 times per day, and by 10%–20% per year. This implies not only a constant shift in the supply/demand equilibrium for that currency pair, but also continuous changes in the financial-economic relationship between those currencies. In this chapter, I will introduce a framework for understanding these fluctuations, both in the short term and the long term.
KeywordsExchange Rate Interest Rate Central Bank Money Supply Purchase Power Parity
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