Abstract
The purpose of this paper is to extend the theory of forward exchange developed by S.C. Tsiang and Egon Sohmen by adding to it an important relationship between the speculative demands for foreign exchange. With this extended theory of forward exchange it is relatively easy to clearly and carefully analyze complex problems involving the interaction of spot and forward markets in different time periods. To illustrate this point the theory is used to analyze the same problem that Tsiang attacked unsuccessfully – determining the deferred effect of government intervention in the forward exchange market.
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