Suppose Russia's inflation rate is 40% over one year but the inflation rate in Japan is...
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Suppose Russia's inflation rate is 40% over one year but the inflation rate in Japan is only 2%. According to relative PPP, what should happen over the year to the Japanese yen's exchange rate against the Russian ruble? (a) Go to https://fred.stlouisfed.org/. Download Japanese yen- U.S. dollar exchange rate (EXJPUS), U.S. consumer price index (for All Urban Con- sumers: All Items Less Food and Energy in U.S. City Average), and Japan's CPI (All Items Excluding Food and Energy for Japan); for 1971 through 2022. Use the EDIT GRAPH tab to change the (quarterly or monthly) series into an annual series by taking average. (b) Compute the real exchange rate for each year and plot them. (c) By plotting (i) the nominal exchange rate and (ii) Pj/Pus for each year, discuss whether purchasing power parity holds in the long run. (d) Based on the long-run exchange rate model studied in class, predict the future nominal exchange rate. Suppose Russia's inflation rate is 40% over one year but the inflation rate in Japan is only 2%. According to relative PPP, what should happen over the year to the Japanese yen's exchange rate against the Russian ruble? (a) Go to https://fred.stlouisfed.org/. Download Japanese yen- U.S. dollar exchange rate (EXJPUS), U.S. consumer price index (for All Urban Con- sumers: All Items Less Food and Energy in U.S. City Average), and Japan's CPI (All Items Excluding Food and Energy for Japan); for 1971 through 2022. Use the EDIT GRAPH tab to change the (quarterly or monthly) series into an annual series by taking average. (b) Compute the real exchange rate for each year and plot them. (c) By plotting (i) the nominal exchange rate and (ii) Pj/Pus for each year, discuss whether purchasing power parity holds in the long run. (d) Based on the long-run exchange rate model studied in class, predict the future nominal exchange rate.
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a According to the data downloaded from FRED Japanese yenUS dollar exchange rate EXJPUS Average annu... View the full answer
Related Book For
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
Posted Date:
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