Purchasing Power Parity and the Fisher Effect

 

Purchasing power parity (PPP) and the Fisher effect are two different theories used in calculating exchange rates. As you have learned this week, these are used internationally to evaluate and compare different countries’ financial status. Consider how these two theories influence international finance.

With these thoughts in mind, address the following:

  • Compare and contrast PPP and the Fisher effect.
  • Explain whether you think that the PPP or the Fisher effect has the greatest impact on international finance. Support your response using this week’s Learning Resources.

By Day 4

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