Purchasing power parity and the Argentine currency board (B). Assume over the 10-year period 1991–2001 the U.S. economy experienced an annualized inflation rate of 1. 5 percent. While the currency board was in place, Argentina experienced annual rates of inflation of 172% in 1991, 24. 6% in 1992, 10. 7%

in 1993, 4. 3% in 1994, 3.3% in 1995, 0. 2% in 1996, 0. 5% in 1997, 0. 9% in 1998, −1.2% in 1999, 0. 9% in 2000 and 0. 7% in 2001.

a. What was the annualized inflation rate in Argentina over that same period

(use annual compounding)?

b. What was the real/PPP exchange rate at the very end of the 10-year currency board before the peso was allowed to float? Was the peso then undervalued or overvalued?