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Recall the theories of purchasing power parity (PPP) and international Fisher effect (IFE) in Chapter 8....

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Finance

Recall the theories of purchasing power parity (PPP)and international Fisher effect (IFE) in Chapter 8. If thesetheories were used to forecast exchange rates, which techniqueswould they be classified? Why?

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Answer Purchasing power parity PPP This theory studies the different countries currencies on the basis of some basket of goods It allows you to buy same sort and amount of goods and services in every country Government agencies use PPP to compare the output of different countries As per this theory two currencies are at equilibrium when prices of    See Answer
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Recall the theories of purchasing power parity (PPP)and international Fisher effect (IFE) in Chapter 8. If thesetheories were used to forecast exchange rates, which techniqueswould they be classified? Why?

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