1.1. price levels between two countries should be equivalent to one another after exchange-rate adjustment
2. The Interest Rate Approach
2.1. the exchange rate between two countries should change by an amount similar to the difference between their nominal interest rates
3. Balance of Payments Approach
3.1. changes in a country’s national income affect the country’s current account
4. Portfolio Balance Approach
4.1. any change in the economic conditions of a country will have a direct impact on the demand and supply for the domestic and the foreign bond, what will in turn influence the exchange rate between the domestic and foreign economies
5. The Monetary Approach
5.1. focuses on the monetary policies of two countries in order to determine their currency exchange rate. The Monetary Approach uses two dynamics to determine an exchange rate, the price dynamics and the interest rates dynamics
