Doubt 1: Positive growth in potential GDP causes expectation of higher future income. Consumers consume more and save less. Higher real interest rate is required to encourage saving.
While Fischer effect, Nominal Interest Rate = Real Interest Rate + Expected inflation and under Interest Rate Parity, the equation expect depreciation of currency of that country that experienced positive growth in potential GDP.
Guys, this sounds unconvincing to me. Please advise. Thanks in advance.
Doubt 2: Uncovered Interest Rate Parity not assumed by arbitrage, E(S)={(1+Ra)/(1+Rb)}^t and Covered Interest Rate Parity, F=(1+Ra t/360)/(1+Rb t/360). If E(S)=F, both equations hold, forward rate unbiased predictor.
Just playing with mathematical equation, I do not see how this two values become the same, while one using 360d and t/360 and one using 365d and ^t/365. Please advise. Thanks in advance.