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Assume that initially, the risk premium, ρ = 0 and that the domestic and foreign interest rates are given by R = .06, R* = .05. Suppose that the risk premium depends linearly on the difference between domestic government debt, B, and domestic assets of the central bank, A, i.e.,
ρ = How much will the central bank have to reduce domestic assets A s.t. the domestic interest rate will increase by (a) 1% (b) 4%?
Treatment Sum
The total value deriving from the application of a treatment in an experimental setup.
Error Sum
The total difference between observed values and the values predicted by a model or hypothesis.
Degrees Of Freedom
Degrees of freedom typically refer to the number of independent values or quantities that can vary in an analysis without violating any constraints.
Treatment
In medical and scientific studies, the specific procedure or set of procedures administered to participants.
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