RDP 9101: The Effect of Steady Inflation on Interest Rates and the Real Exchange Rate in a World with Free Capital Flows
Equation (A6)
i
=
r
*
+
π
[
ε
γ
+
δ
ε
(
1
−
τ
)
(
γ
+
α
δ
λ
)
+
δ
]
≡
r
*
+
π
[
1
−
γ
τ
−
(
1
−
τ
)
α
δ
λ
γ
+
δ
/
ε
]
−
1
.
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