Why Is It Difficult to Establish a Causal Relationship? How

question 67

Essay

Why is it difficult to establish a causal relationship? How do researchers try to establish causality? Explain using an example from the chapter.

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Definitions:

Note Issuance Facility

A financial arrangement that allows a borrower to issue short-term debt securities as needed, up to a predetermined limit.

Eurobond Agreement

An international bond that is denominated in a currency not native to the country where it is issued, often used by companies and governments to raise capital.

Short-Term

Relating to a brief period of time, typically less than a year.

Covered Interest Arbitrage

A strategy where investors exploit the interest rate differential between two countries while covering exchange rate risk, aiming for guaranteed returns.