This paper provides an investigation as to whether there has been any improvement on the effectiveness of IRP in forecasting exchange rates in three-month periods. With AUD being the base currency, the research is conducted using nine foreign currency proxies, namely USD, JPY, GBP, CHF, NZD, CAD, HKD, SGD and CNY. Historical exchange rates of AUD over the nine foreign currencies and three-month interest rates in the ten countries from 1 January 1995 to 30 December 2008 are collected and computed. According to our results, although there is evidence suggesting that IRP generally holds, its quality does not appear to have improved in recent years. Indeed, we found strong evidence indicating that the quality of IRP is not related to the time horizon. One possible explanation to this finding might be that the recent financial crisis has triggered significant government intervention and brought incredible currency risk, deteriorating the quality of IRP.
The gender division of labour, in which men tend to specialise more in paid work within the market, and women tend to specialise more in unpaid work within the home, is a feature common to modern Western society. Economic theory suggests that the price an individual can command in the labour market for an hour of their time plays a key role in determining the way in which they allocate their time between different uses. This is the case in models of individual utility maximization, in which the wage determines the optimal degree of substitution between purchased goods and services and domestically produced output, and also in models that emphasise the gains to intra household specialization and trade.
However, it is not clear to what extent in practice gender wage differences explain the observed gender division of labour. The importance of social norms regarding gender stereotypes and innate biological differences in the capabilities of men and women may swamp the role of gender wage differences in the allocation of time.
Open international capital markets have been instrumental in efficiently allocating risk and allowing firms to fulfill their capital investment demand. Also, systematic and credit risk measures may affect business investment through multiple channels. First, changes in market interest rates imply changes in the cost of capital, which in turn affect investment; the so-called interest channel. Second, changes in market interest rates affect the net cash flow available to a firm.
