(Note: Replacing an earlier version, with a correction on interest rate parity and some added detail)
In a world where investors and businesses are global, it is imperative that we be able to move across currencies easily. In this session, I argue that inflation is the key reason why currencies matter, and that differences in expected inflation across currencies explain differences in interest rates and why exchange rates change over time.
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/FoundationsOnline/slides/session12.pdf
Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/FoundationsOnline/postclass/session12test.pdf
Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/FoundationsOnline/postclass/session12soln.pdf
