Question
In December 2015, the euro exchange rate with the RON (the Romanian currency) is 0.27 /RON. Over the year 2016, the Romanian inflation rate is
In December 2015, the euro exchange rate with the RON (the Romanian currency) is 0.27 /RON. Over the year 2016, the Romanian inflation rate is 6% and the Euro area inflation rate is 4%. If the exchange rate at the end of the year 2016 is 0.25 /RON, does the euro appear to be overvalued, undervalued, or at the PPP level? Why? Explain each step of reasoning clearly.
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International Finance Transactions Policy And Regulation
Authors: Hal Scott, Anna Gelpern
20th Edition
1609303164, 978-1609303167
