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Assume the export price of a Nissan car from Japan is Yen 3,000,000. The exchange rate is Yen 122.00/$. A forecast on inflation in
Assume the export price of a Nissan car from Japan is Yen 3,000,000. The exchange rate is Yen 122.00/$. A forecast on inflation in the USA is 2% and 0% in Japan per annum. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? a) Assuming 100% pass-through of the exchange rate changes, what should be the $ price of the Nissan at the end of the year? b) Assuming 70% pas-through of the exchange rate changes, what should be the price of the Nissan at the end of the year
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