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Question
Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?A.The impact of investor psychology on short-run exchange rate movements
B.The strong relationship between inflation rates and interest rates
C.The impact of interest rates and short-term exchange rate movements
D.The strong relationship between interest rate differentials and subsequent changes in spot exchange rates
E.Government intervention in cross-border trade that violates the assumption of efficient markets
Answer
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