Katzarov Schmid Model

The Katzarov-Schmid Model is a framework in finance that explains how currency exchange rates and interest rates influence each other over time. It suggests that changes in a country's interest rates can predict future changes in its currency value, reflecting expectations about economic conditions. This model combines economic theory and market behavior, helping analysts understand and forecast currency movements by considering interest rate differentials and investor expectations, ultimately providing a structured approach to analyzing international financial stability and exchange rate dynamics.