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Different countries have different interest rates. While most developed countries have both inflation rates and bank deposit rates close to zero, there are a fe
by greglindahl 9y ago
Different countries have different interest rates. While most developed countries have both inflation rates and bank deposit rates close to zero, there are a few countries with high inflation and high interest rates.
- djohnston 9y agoArbitrage opportunity?
- akg_67 9y agoChanges in foreign exchange rates usually arbitrage out most interest rate disparities.
- greglindahl 9y agoIt's called the "carry trade".
- konschubert 9y agoThe higher interest rate covers the higher inflation. Currencies are very well arbitraged already, I wouldn't expect any inefficiencies to profit from.
- mortehu 9y agoBut check this out: http://faculty.chicagobooth.edu/workshops/finance/pdf/Verdelhan_Deviations.pdf http://faculty.chicagobooth.edu/workshops/finance/pdf/Verdel... "We find that deviations from the covered interest rate parity condition (CIP) imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk or transaction costs."