Notes
Chapter 3
1An interesting study of violations of the law of one price for some internationally distributed retail goods (of the IKEA Company) is in Haskel and Wolf (2001).
2For interesting views on the trade deficit, see Ohmae (1991) and Pakko (1999).
3See Cumby (1996).
4See Parsley and Wei (2007).
Chapter 4
1In algebraic terms, after the year has elapsed, the new spot FX rate, given that APPP also holds after the goods price changes, should be XP1$/£ = [P0$(1 + p$)]/[P0£(1 + p£)]. Substitute from equation (3.2) the time-0 FX rate of XP0$/£ = P0$/P0£, and we have that the new (time-1) spot FX rate should be XP0$/£[(1 + p$)/(1 + p£)]. Equation (4.1) follows.
2For a fascinating account of the FX market and the Bretton Woods conference, especially ...
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