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PPP & Irp
PPP & Irp
Submitted By:
Prajapati Kuldip(42)
Prajapati Nirav (43)
Prajapati Vishvani (45)
purohit Suresh (46)
Raval Shilpa (47)
equal
between countries
1. In mathematical terms:
where
e0 =
ih =
if =
t =
2.
4. PPP says
the currency with the higher inflation rate is
expected to depreciate relative to the currency with
the lower rate of inflation.
Rule of Thumb:
If the difference in interest rates is greater than the
forward premium (or expected change in the spot
rate), invest in the higher yielding currency.
If the difference in interest rates is less than the
forward premium (or expected change in the spot
rate), invest in the lower yielding currency.