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What is the implication for cross-border trades if it can be shown that interest rate parity is maintained consistently across different markets and different currencies?

User Upe
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Final answer:

Consistently maintaining interest rate parity across different markets and currencies has significant implications for cross-border trades, leading to fair and efficient trading.

Step-by-step explanation:

When interest rate parity is consistently maintained across different markets and currencies, it implies that the exchange rates are in equilibrium and there are no opportunities for risk-free arbitrage. This has significant implications for cross-border trades as it means that the prices of internationally traded goods will be similar across countries. Businesses would not be able to take advantage of differences in exchange rates to buy goods cheaper in one country and sell them at a higher price in another country. This leads to more fair and efficient cross-border trades.

User Jitender
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