Appraising Currency Strengths and Weaknesses: An Operational Model for Calculating Parity Exchange Rates

Robert M Everett, Abraham M George and Aryeh Blumberg
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Robert M Everett: General Electric, Venezuela
Abraham M George: Multinational Computer Models, Inc.
Aryeh Blumberg: Montclair State College

Journal of International Business Studies, 1980, vol. 11, issue 2, 80-90

Abstract: This paper present a model for appraising currencies that is based on an operational variant of purchasing power parity doctrine. The behavior of currencies under different exchange regimes—floating rates, strictly managed rates, crawling peg rates, and fixed exchange rates—is analyzed in detail. The results support this doctrine, provided the parity exchange rate is derived from an interrelationship of differentials in inflation rates and changes in exchange rates of trading partners, both appropriately weighted by trade shares. A discussion of forecasting implications concludes the paper.© 1980 JIBS. Journal of International Business Studies (1980) 11, 80–90

Date: 1980
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