International Finance (FE5001)

The Gravity Model of International trade is widely thought of as a “testing bed” on which to assess the trade impacts of different trade-related policies. It is also seen as a model which provides “some of the clearest and robust findings in empirical economics”. This essay is to evaluate above statement by using thousands of published articles and working papers.

The contents of this essay will be looking and summarizing the history of exchange rate regime of Jamaica. This will then follow up with definitions of these three theories which are: Interest Rate Parity (CIP), International Fisher Effect (IFE) and Purchasing Power Parity (PPP). There would be a thorough discussion on how Interest rate parity, International Fischer Effect and Purchasing Power Parity help describe the behavior of the exchange rate. After that, there would be an estimation of Pur...