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The exchange rate parities which are the foundation of the euro would come under pressure.
"Central Banks would intervene massively to maintain exchange rate parities if they came under pressure," he said.
The question that arises here is that does Zambia in her local Kwacha money markets have the exact trade levels and monetary liquidities as the two transatlantic states day in and day out as reflected in the exchange rate parities?
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That proposal has enraged East Germans, who have staged huge protests demanding an exchange rate parity, or one for one.
This same pattern is still seen in today's exchange rate parity.
When influences on the two countries were compared or added, exchange rate parity was assumed.
In the early 1990s Italy was the first to fall; after it toppled, Britain, Spain, Portugal and eventually France were forced to follow.Back then European politicians blamed declines in currencies on speculators who failed to understand that countries were committed to maintaining their exchange-rate parities.
When the no-arbitrage condition is satisfied with the use of a forward contract to hedge against exposure to exchange rate risk, interest rate parity is said to be covered.
When the no-arbitrage condition is satisfied without the use of a forward contract to hedge against exposure to exchange rate risk, interest rate parity is said to be uncovered.
At some point in 2015 the dollar-euro exchange rate will hit parity.A stronger dollar and slower growth in the emerging world will also hit share prices.
As previously noted, when confidence in the fixed parity exchange rate drops and market participants expect a change in parity, short-term capital movements may be disequilibrating.
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