Which of the following is a feature of the 'Uncovered Interest Parity' puzzle or forward-premium puzzle?
A. Interest differentials are always zero
B. Forward rates are perfect predictors of future spot rates
C. High-interest currencies tend to appreciate rather than depreciate as uncovered interest parity would predict
D. High-interest currencies always depreciate as predicted
Answer: Option C
Solution (By JKSSB Mock Tests)
Empirical evidence often shows that currencies with high interest rates tend to appreciate, contrary to the prediction of uncovered interest parity that they should depreciate; this is known as the forward-premium puzzle.
Explanation:
Absolute poverty is measured with reference to a fixed poverty line based on minimum calorie requirements or income needed to meet basic needs. Gini and Lorenz measure inequality (relative poverty aspects).
Explanation:
India has achieved current account convertibility but maintains a managed and partial capital account convertibility with prudential controls on certain flows.
No comments yet. Be the first to start the discussion!