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Basic Question 5 of 6
Real exchange rate movements are determined by a few factors: the long run equilibrium level, nominal interest rate spread, expected inflation differential and risk premium. Which one(s) is (are) directly observable?
User Contributed Comments 2
| User | Comment |
|---|---|
| danubian | Expected inflation differential as well, no? There are inflation-indexed bonds and swaps which serve as proxies for inflation expectations |
| davidt876 | the fact that you can only observe it through proxies would mean that it's indirectly observable |
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Learning Outcome Statements
explain how flows in the balance of payment accounts affect currency exchange rates;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.