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ECON5319_Final_S2011

ECON5319_Final_S2011 - ECON 5319 Final Exam 100 points 1...

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ECON 5319 Final Exam 100 points 1. What parity conditions must hold for real interest rates to be equal internationally? Explain. 2. In the equation above that tests the PPP hypothesis, what are the implied values for a 0 , a 1 , and a 2 ? 3. In the equation above, what are the hypothesized signs of the coefficients under the flex- price monetary model? Explain the economic rationale for each. 4. In the equation above, what are the hypothesized signs of the coefficients under the sticky- price monetary model? Explain the economic rationale for each. 5. In the equation above, what are the hypothesized signs of the coefficients under the portfolio balance model? Explain the economic rationale for each. 6. Explain how exchange rate overshooting can occur in the sticky-price model? 7. Evaluate the following statement. "The monetary models of exchange rate determination are good predictors of the future exchange rate." 8. Describe the process for a sterilized intervention.
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