Question: Does purchasing power parity (PPP) hold between Brazil and the United States? If not, does PPP predict that the real will appreciate or depreciate against

Does purchasing power parity (PPP) hold between Brazil and the United States? If not, does PPP predict that the real will appreciate or depreciate against the U.S. dollar?

In August 2013, the exchange rate between the U.S. dollar and the Brazilian real was 3.125 real per dollar. In the same month, the price of a Big Max was 23 real in Sao Paulo and $3.99 in New York. Brazil’s interest rate was 14.25 percent per year and the U.S. interest rate was 1 percent per year.

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