ParityConditionsinInternationalFinance.pptVIP

Parity Conditions in International Finance International Finance (B 645) Outline Purchasing Power Parity International Fisher Effect Interest Rate Parity Purchasing Power Parity (PPP) Absolute Version Individual goods and services tend to sell for the same price everywhere. If prices differ, arbitrage would take place which would change the price and/or the exchange rates to force an equilibrium Relative Version The rate of change in the prices of the products should be somewhat similar when measured in a common currency PPP Continued… The exchange rate between the home currency and any fore