Date Exchange Rate Quetzales/USD USCPI GuatemalaCPI

Jun 1986 2.50 50.22 9.46

Jul 1986 2.50 50.22 9.73

Aug 1986 2.50 50.31 9.85

Sep 1986 2.50 50.54 9.84

Oct 1986 2.50 50.58 9.98

Nov 1986 2.50 50.63 9.93

Dec 1986 2.50 50.68 9.92

Jan 1987 2.50 51.00 10.13

Feb 1987 2.50 51.18 10.20

Mar 1987 2.50 51.41 10.34

Apr 1987 2.50 51.68 10.29

May 1987 2.50 51.87 10.41

Jun 1987 2.50 52.05 10.45

Jul 1987 2.50 52.19 10.51

Aug 1987 2.50 52.46 10.55

Sep 1987 2.50 52.74 10.57

Oct 1987 2.50 52.88 10.61

Nov 1987 2.50 52.92 10.71

Dec 1987 2.50 52.92 10.91

Jan 1988 2.50 53.06 11.09

Feb 1988 2.50 53.20 11.19

Mar 1988 2.50 53.43 11.24

Apr 1988 2.50 53.70 11.26

May 1988 2.50 53.89 11.23

Jun 1988 2.71 54.11 11.37

Jul 1988 2.71 54.34 11.76

Aug 1988 2.71 54.57 11.96

Sep 1988 2.71 54.94 12.02

Oct 1988 2.71 55.12 12.03

Nov 1988 2.71 55.17 12.04

Dec 1988 2.71 55.26 12.11

Jan 1989 2.70 55.54 12.28

Feb 1989 2.70 55.77 12.34

Mar 1989 2.70 56.09 12.43

Apr 1989 2.70 56.45 12.55

May 1989 2.70 56.77 12.61

Jun 1989 2.70 56.91 12.69

Jul 1989 2.70 57.05 12.77

Aug 1989 2.78 57.14 12.98

Sep 1989 2.78 57.32 13.11

Oct 1989 2.78 57.60 13.35

Nov 1989 3.40 57.74 13.76

Dec 1989 3.40 57.83 14.28

If you are the economic advisor to the Guatemalan government and it is October, 1989. The government realizes it will have to give up the existing parity exchange rate of 2.78 quetzales/dollar. But it has to pick a new parity.

a. How to Calculate a reasonable number using the data provided. Identify the conceptual framework are you applying and explain why it is appropriate.