Compare the Most Recent Ppp Exchange Rates for the Pound, Yen and Euro with Their Nominal Exchanges Rates

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Q1) Using data from the OECD (see Blackboard), compare the most recent PPP exchange rates for the pound, yen and euro with their nominal exchanges rates. What differences do you observe? What accounts for those differences?

PPP exchange rates are the converted currency rates that equalize the purchasing power of different currencies for a given basket of goods by eliminating the differences in price levels between countries. The following is the comparison of the PPP exchange rates for pound, yen and euro between their nominal exchange rates in 2009, shows that PPP exchange rate of Japan was lower than the nominal exchange rates, whereas United Kingdom and Euro area had higher PPP exchange rates than their nominal exchange rates. There are differentials between PPP exchange rates and market or nominal exchange rates.

|Comparison between PPP exchange rates with nominal exchange rates for pound, yen and euro in 2009 | | | | | | |

Measure: National currency per US dollar | | | | | | | | | | | | | | | | | | | | | |Country(Currency) |2000 |2001 |2002 |2003 |2004 |2005 |2006 |2007 |2008 |2009 | |UK (pound) |0.6360027 |0.6266982 |0.6276274 |0.6412156 |0.632395 |0.6361731 |0.6420044 |0.6562877 |0.6624358 |0.6614275 | |Japan (yen) |154.75272 |149.46093 |143.7742 |139.68695 |134.37491 |129.55195 |124.34306 |120.02389 |116.45926 |114.98394 | |Mexico (peso) |6.0992769 |6.3114651 |6.5536969 |6.8128126 |7.213726 |7.1268617 |7.3718514 |7.4857351 |7.8158342 |8.2182434 | |Korean (won) |745.26152 |756.8691 |769.77179 |794.24057 |795.77749 |788.92013 |762.97283 |757.18655 |761.65418 |773.43294 | | The PPP exchange rate for UK pound and Mexican peso had been increased steadily over the period of 2000 and 2009, while Japanese yen had been decresased constanly over...
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