ZINSPARITÄT | Zinssätze und Wechselkurse: Inländische vs ausländische Kapitalanlagen (+ Aufwertung)

This video uses the (uncovered and covered) interest rate parity theory to show you how you can determine the corresponding arbitrage condition and thus exchange rates with the help of an investor who can invest money domestically and abroad. We will examine how interest rates influence the exchange rate. We will then see how an expected appreciation or depreciation of the domestic currency affects the interest rates a country must offer investors. We will also learn how to represent interest rate parity in a diagram and thus graphically determine the exchange rate. Finally, we will also learn the difference between uncovered and covered interest rate parity. Interest rate parity is used, among other things, in the Mundell-Fleming model to determine the exchange rate. An overview of all videos with links can be found directly at https://10minutenVWL.de 0:00 Introduction and Definitions 2:06 Investing Domestically or Abroad 4:58 How Interest Rate Parity Works 8:04 Interest Rate Parity Equation 9:40 Interest Rate Parity Example Exercises 14:06 Interest Rates and Expected Appreciation 15:47 Turkish Lira Example 17:53 Derivation of the Graphic 21:04 Interpretation of the Graphic 23:21 Uncovered vs. Covered Interest Rate Parity If you're looking for a good macroeconomics textbook on these and many other topics, I recommend "Macroeconomics" by Blanchard and Illing. You can find it on Amazon, for example, https://amzn.to/3Ud4LIR (ad) You can download the slides from the video directly here: https://www.10minutenvwl.de/zinsparit... You can also download the alternative slides with the exchange rate in quoted prices here: https://www.10minutenvwl.de/zinsparit... Interactive graphic from the video: https://www.geogebra.org/classic/fj6x... #interest_rate_sparity #exchange_rate #macroeconomics #appreciation