International Finance
QUESTION ONE
A)
When the effects changes in exchange rates get transferred to import prices, it results into the occurrence of exchange rate pass-through. Within a free international trade, that is, lack of costs of trade, there should be complete exchange rate pass-through. When the law of one price holds not anymore, this cause incomplete pass-through as the engagement of most traders leans on the price to market (PTM). The variations caused as a result of differences in costs of trade between countries due to economic factors, is the reason for the difference in the price of the same
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