International Financial ManagementPPP理论的研究――购买力评价初析.docVIP

International Financial ManagementPPP理论的研究――购买力评价初析 　　Introduction: 　　 　　Nowadays in this modern world, we should believe that economic development is affecting our lives. Economic communication and cooperation have already across the ethnic origin, skin tone and nationality. In this environment, trade exchange between different countries become even more ordinary, and the value of the currencies are seemed especially important. Therefore, we should now understand a phrase called PPP, which the full name is Purchasing Power Parity. It is a theory to research and compare the purchasing power relationship between the different Currencies. 　　Around this essay, it will first give the general definition of purchasing power parity and then analyse and discuss its theory content. Secondly, it is going to respectively explain the absolute purchasing power parity and relative purchasing power parity. Basically, the absolute PPP is best described by the law of one good, one price and the relative PPP has a different concept from absolute PPP. Relative PPP examines the relationship between changes in exchange rates and changes in the aggregate price levels in the two countries involved (Peijie Wang, 2005:37). Finally, the essay will take some empirical tests and evidence on PPP to analysis its accuracy and actual point. 　　 　　Purchasing Power Parity (PPP) 　　 　　Purchasing power parity was made by Gustav Cassel in 1920. When Cassel joined into the international financial research, a monetary system called gold standard has been canceled in many countries. In the same period, although some areas have retained the gold standard, however, the gold standard has been gradually weakened in these countries. He was started to analyse the foreign exchange rate in such environment and the purpose of his research for PPP was in order to establish a monetary standard between the countries. The general definition of PPP is a theory about exchange rate determination based on a plain i