oussama94
05-28-2017, 23:47
The purchasing power parity theory is based on the belief that foreign exchange
rates should be determined by the relative prices of a similar basket
of goods between two countries. Any change in a nation’s inflation rate
should be balanced by an opposite change in that nation’s exchange rate.
Therefore, according to this theory, when a country’s prices are rising due
to inflation, that country’s exchange rate should depreciate in order to return
to parity
rates should be determined by the relative prices of a similar basket
of goods between two countries. Any change in a nation’s inflation rate
should be balanced by an opposite change in that nation’s exchange rate.
Therefore, according to this theory, when a country’s prices are rising due
to inflation, that country’s exchange rate should depreciate in order to return
to parity