International Parity Conditions/PPP Theory Question

Can PPP theory explain the reason(s) for the decline in the AUD against the USD during the global financial crisis (see 2008Q2 to 2009Q1)? Calculate the percentage change in the USD/AUD exchange rate over this period. What other economic factors could have been at play? Provide commentary

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Exchange Rate Real GDP Growth Rate (%) Rates of Inflation (%) Interest Rate (%) USD/AUD United States Australia United States Australia United States Australia 30/03/2021 0.760 0.547% 1.278% 1.894% 0.943% 1.328% 1.406% 30/12/2020 0.769 -2.263% -0.929% 1.211% 0.861% 0.856% 0.886% 30/09/2020 0.717 -2.888% -3.646% 1.261% 0.693% 0.643% 0.879% 30/06/2020 0.689 -9.084% -6.204% 0.430% -0.261% 0.682% 0.899% 30/03/2020 0.616 0.631% 1.389% 2.099% 2.279% 1.359% 1.002% 30/12/2019 0.700 2.569% 2.138% 2.026% 1.842% 1.790% 1.129% 30/09/2019 0.674 2.318% 1.926% 1.763% 1.674% 1.793% 1.104% 28/06/2019 0.702 2.111% 1.650% 1.849% 1.502% 2.335% 1.636% 29/03/2019 0.710 2.153% 1.931% 1.608% 1.242% 2.649% 2.115% 28/12/2018 0.704 2.321% 2.374% 2.217% 1.695% 3.043% 2.609% 28/09/2018 0.724 3.053% 2.703% 2.612% 1.977% 2.922% 2.621% 29/06/2018 0.739 3.296% 3.247% 2.683% 2.074% 2.919% 2.744% 30/03/2018 0.767 3.015% 3.077% 2.226% 1.991% 2.753% 2.775% 29/12/2017 0.782 2.718% 2.452% 2.115% 2.095% 2.370% 2.647% 29/09/2017 0.785 2.267% 3.018% 1.969% 1.830% 2.238% 2.649% 30/06/2017 0.767 2.147% 2.080% 1.919% 1.930% 2.254% 2.502% 30/03/2017 0.767 1.885% 2.122% 2.551% 2.126% 2.443% 2.765% 30/12/2016 0.724 2.004% 2.732% 1.807% 1.385% 2.129% 2.491% 30/09/2016 0.765 1.648% 2.274% 1.157% 1.391% 1.561% 1.928% 30/06/2016 0.745 1.368% 3.230% 1.110% 1.021% 1.746% 2.315% 30/03/2016 0.770 1.648% 2.685% 0.992% 1.311% 1.908% 2.586% 30/12/2015 0.729 1.875% 2.689% 0.400% 1.690% 2.182% 2.773% 30/09/2015 0.702 2.183% 2.474% 0.159% 1.411% 2.217% 2.772% 30/06/2015 0.769 3.040% 1.886% 0.037% 1.508% 2.158% 2.758% 30/03/2015 0.764 3.761% 2.248% -0.113% 1.328% 1.961% 2.540% 30/12/2014 0.820 2.564% 2.084% 1.164% 1.622% 2.268% 3.181% 30/09/2014 0.875 2.831% 2.559% 1.791% 2.310% 2.488% 3.476% 30/06/2014 0.944 2.452% 2.877% 2.080% 3.110% 2.613% 3.833% 28/03/2014 0.924 1.294% 2.776% 1.430% 2.930% 2.758% 4.136% 30/12/2013 0.891 2.532% 2.387% 1.207% 2.745% 2.731% 4.106% 30/09/2013 0.935 1.920% 2.087% 1.505% 2.264% 2.697% 3.865% 28/06/2013 0.915 1.296% 1.865% 1.415% 2.388% 1.973% 3.327% 29/03/2013 1.043 1.616% 2.193% 1.740% 2.503% 1.934% 3.468% 28/12/2012 1.038 1.566% 2.835% 1.904% 2.102% 1.693% 3.105% 28/09/2012 1.040 2.593% 3.472% 1.685% 1.906% 1.626% 3.057% 29/06/2012 1.025 2.374% 4.237% 1.888% 1.208% 1.806% 3.358% 30/03/2012 1.036 2.600% 4.677% 2.829% 1.524% 2.027% 3.980% 30/12/2011 1.025 1.523% 3.439% 3.345% 2.990% 2.036% 4.101% 30/09/2011 0.972 0.918% 3.312% 3.716% 3.423% 2.398% 4.553% 30/06/2011 1.071 1.738% 2.640% 3.346% 3.653% 3.189% 5.326% 30/03/2011 1.031 2.031% 1.976% 2.148% 3.361% 3.443% 5.516% 30/12/2010 1.012 2.788% 2.761% 1.230% 2.646% 2.848% 5.337% 30/09/2010 0.968 3.349% 2.474% 1.203% 2.882% 2.768% 5.041% 30/06/2010 0.845 2.927% 2.080% 1.775% 3.011% 3.472% 5.527% 30/03/2010 0.919 1.768% 2.123% 2.353% 2.919% 3.703% 5.557% 30/12/2009 0.893 0.082% 2.643% 1.488% 2.052% 3.448% 5.462% 30/09/2009 0.883 -3.138% 1.426% -1.607% 1.188% 3.500% 5.449% 30/06/2009 0.808 -3.995% 1.889% -0.942% 1.528% 3.298% 5.029% 30/03/2009 0.680 -3.282% 1.553% -0.184% 2.323% 2.711% 4.226% 30/12/2008 0.691 -2.540% 1.675% 1.596% 3.695% 3.227% 4.802% 30/09/2008 0.789 0.242% 2.640% 5.253% 4.989% 3.848% 5.966% 30/06/2008 0.960 1.380% 3.009% 4.310% 4.447% 3.866% 6.366% 28/03/2008 0.919 1.447% 3.372% 4.137% 4.268% 3.659% 6.153% 28/12/2007 0.877 2.161% 3.724% 4.031% 2.999% 4.267% 6.137% 28/09/2007 0.885 2.399% 4.557% 2.349% 1.848% 4.734% 6.020% 29/06/2007 0.848 1.939% 4.940% 2.665% 2.095% 4.846% 6.011% 30/03/2007 0.808 1.541% 4.505% 2.432% 2.482% 4.676% 5.804% 29/12/2006 0.788 2.609% 3.197% 1.965% 3.337% 4.625% 5.651% 29/09/2006 0.746 2.328% 2.721% 3.340% 3.837% 4.896% 5.738% 30/06/2006 0.743 2.977% 2.307% 3.924% 3.995% 5.063% 5.698% 30/03/2006 0.714 3.225% 2.587% 3.691% 3.045% 4.577% 5.279% 30/12/2005 0.734 2.983% 3.179% 3.675% 2.693% 4.487% 5.395% 30/09/2005 0.764 3.448% 3.114% 3.820% 3.090% 4.215% 5.202% 30/06/2005 0.762 3.607% 2.792% 2.923% 2.481% 4.159% 5.299% 30/03/2005 0.773 3.909% 3.019% 3.035% 2.369% 4.304% 5.476% 30/12/2004 0.777 3.356% 3.058% 3.385% 2.638% 4.177% 5.348% 30/09/2004 0.724 3.491% 3.968% 2.675% 2.276% 4.301% 5.568% 30/06/2004 0.697 4.235% 4.927% 2.786% 2.545% 4.597% 5.869% 30/03/2004 0.755 4.353% 4.578% 1.818% 1.906% 4.010% 5.570% Exchange Rate Real GDP Growth Rate (%) Rates of Inflation (%) Interest Rate (%) USD/AUD United States Australia United States Australia United States Australia 30/03/2021 0.760 0.547% 1.278% 1.894% 0.943% 1.328% 1.406% 30/12/2020 0.769 -2.263% -0.929% 1.211% 0.861% 0.856% 0.886% 30/09/2020 0.717 -2.888% -3.646% 1.261% 0.693% 0.643% 0.879% 30/06/2020 0.689 -9.084% -6.204% 0.430% -0.261% 0.682% 0.899% 30/03/2020 0.616 0.631% 1.389% 2.099% 2.279% 1.359% 1.002% 30/12/2019 0.700 2.569% 2.138% 2.026% 1.842% 1.790% 1.129% 30/09/2019 0.674 2.318% 1.926% 1.763% 1.674% 1.793% 1.104% 28/06/2019 0.702 2.111% 1.650% 1.849% 1.502% 2.335% 1.636% 29/03/2019 0.710 2.153% 1.931% 1.608% 1.242% 2.649% 2.115% 28/12/2018 0.704 2.321% 2.374% 2.217% 1.695% 3.043% 2.609% 28/09/2018 0.724 3.053% 2.703% 2.612% 1.977% 2.922% 2.621% 29/06/2018 0.739 3.296% 3.247% 2.683% 2.074% 2.919% 2.744% 30/03/2018 0.767 3.015% 3.077% 2.226% 1.991% 2.753% 2.775% 29/12/2017 0.782 2.718% 2.452% 2.115% 2.095% 2.370% 2.647% 29/09/2017 0.785 2.267% 3.018% 1.969% 1.830% 2.238% 2.649% 30/06/2017 0.767 2.147% 2.080% 1.919% 1.930% 2.254% 2.502% 30/03/2017 0.767 1.885% 2.122% 2.551% 2.126% 2.443% 2.765% 30/12/2016 0.724 2.004% 2.732% 1.807% 1.385% 2.129% 2.491% 30/09/2016 0.765 1.648% 2.274% 1.157% 1.391% 1.561% 1.928% 30/06/2016 0.745 1.368% 3.230% 1.110% 1.021% 1.746% 2.315% 30/03/2016 0.770 1.648% 2.685% 0.992% 1.311% 1.908% 2.586% 30/12/2015 0.729 1.875% 2.689% 0.400% 1.690% 2.182% 2.773% 30/09/2015 0.702 2.183% 2.474% 0.159% 1.411% 2.217% 2.772% 30/06/2015 0.769 3.040% 1.886% 0.037% 1.508% 2.158% 2.758% 30/03/2015 0.764 3.761% 2.248% -0.113% 1.328% 1.961% 2.540% 30/12/2014 0.820 2.564% 2.084% 1.164% 1.622% 2.268% 3.181% 30/09/2014 0.875 2.831% 2.559% 1.791% 2.310% 2.488% 3.476% 30/06/2014 0.944 2.452% 2.877% 2.080% 3.110% 2.613% 3.833% 28/03/2014 0.924 1.294% 2.776% 1.430% 2.930% 2.758% 4.136% 30/12/2013 0.891 2.532% 2.387% 1.207% 2.745% 2.731% 4.106% 30/09/2013 0.935 1.920% 2.087% 1.505% 2.264% 2.697% 3.865% 28/06/2013 0.915 1.296% 1.865% 1.415% 2.388% 1.973% 3.327% 29/03/2013 1.043 1.616% 2.193% 1.740% 2.503% 1.934% 3.468% 28/12/2012 1.038 1.566% 2.835% 1.904% 2.102% 1.693% 3.105% 28/09/2012 1.040 2.593% 3.472% 1.685% 1.906% 1.626% 3.057% 29/06/2012 1.025 2.374% 4.237% 1.888% 1.208% 1.806% 3.358% 30/03/2012 1.036 2.600% 4.677% 2.829% 1.524% 2.027% 3.980% 30/12/2011 1.025 1.523% 3.439% 3.345% 2.990% 2.036% 4.101% 30/09/2011 0.972 0.918% 3.312% 3.716% 3.423% 2.398% 4.553% 30/06/2011 1.071 1.738% 2.640% 3.346% 3.653% 3.189% 5.326% 30/03/2011 1.031 2.031% 1.976% 2.148% 3.361% 3.443% 5.516% 30/12/2010 1.012 2.788% 2.761% 1.230% 2.646% 2.848% 5.337% 30/09/2010 0.968 3.349% 2.474% 1.203% 2.882% 2.768% 5.041% 30/06/2010 0.845 2.927% 2.080% 1.775% 3.011% 3.472% 5.527% 30/03/2010 0.919 1.768% 2.123% 2.353% 2.919% 3.703% 5.557% 30/12/2009 0.893 0.082% 2.643% 1.488% 2.052% 3.448% 5.462% 30/09/2009 0.883 -3.138% 1.426% -1.607% 1.188% 3.500% 5.449% 30/06/2009 0.808 -3.995% 1.889% -0.942% 1.528% 3.298% 5.029% 30/03/2009 0.680 -3.282% 1.553% -0.184% 2.323% 2.711% 4.226% 30/12/2008 0.691 -2.540% 1.675% 1.596% 3.695% 3.227% 4.802% 30/09/2008 0.789 0.242% 2.640% 5.253% 4.989% 3.848% 5.966% 30/06/2008 0.960 1.380% 3.009% 4.310% 4.447% 3.866% 6.366% 28/03/2008 0.919 1.447% 3.372% 4.137% 4.268% 3.659% 6.153% 28/12/2007 0.877 2.161% 3.724% 4.031% 2.999% 4.267% 6.137% 28/09/2007 0.885 2.399% 4.557% 2.349% 1.848% 4.734% 6.020% 29/06/2007 0.848 1.939% 4.940% 2.665% 2.095% 4.846% 6.011% 30/03/2007 0.808 1.541% 4.505% 2.432% 2.482% 4.676% 5.804% 29/12/2006 0.788 2.609% 3.197% 1.965% 3.337% 4.625% 5.651% 29/09/2006 0.746 2.328% 2.721% 3.340% 3.837% 4.896% 5.738% 30/06/2006 0.743 2.977% 2.307% 3.924% 3.995% 5.063% 5.698% 30/03/2006 0.714 3.225% 2.587% 3.691% 3.045% 4.577% 5.279% 30/12/2005 0.734 2.983% 3.179% 3.675% 2.693% 4.487% 5.395% 30/09/2005 0.764 3.448% 3.114% 3.820% 3.090% 4.215% 5.202% 30/06/2005 0.762 3.607% 2.792% 2.923% 2.481% 4.159% 5.299% 30/03/2005 0.773 3.909% 3.019% 3.035% 2.369% 4.304% 5.476% 30/12/2004 0.777 3.356% 3.058% 3.385% 2.638% 4.177% 5.348% 30/09/2004 0.724 3.491% 3.968% 2.675% 2.276% 4.301% 5.568% 30/06/2004 0.697 4.235% 4.927% 2.786% 2.545% 4.597% 5.869% 30/03/2004 0.755 4.353% 4.578% 1.818% 1.906% 4.010% 5.570%

Answer rating: 100% (QA)

Based on the data provided in the image the USDAUD exchange rate increased from 0680 on March 30 200... View the full answer