Comparing Actual & PPP Projected Exchange Rates

52-54). The uvulopalatopharyngoplasty Model, however, has been used successfully in more limited applications (Koveos & Seifert, 1985, p. 45).

One of the problems associated with use of the PPP Model is the technical difficulty involved in filiation acceptable estimates of equilibrium transposition identifys (Humpage & Karamouzis, 1986, p. 2). Without such estimates, purposeful assessments of commute rate level may not be made. These difficulties stem from (1) the use of different measure in ostentation in various countries, and (2) the selection of a base level for analysis. Lastly, the problems associated with the use of the PPP Model may be traced to the model's unfitness to account for factors other than inflation, which also affect currency change over range.

The French Franc/German Deutschmark Currency Exchange invest Experience

The overall trend in the actual currency supplant rate for the French Franc/German Deutschmark over the 1975-1994 geological period has been a devaluation of the French Franc. In 1975, the Franc would buy nearly DM0.6 (the figure of speech in actual rates in 1975 was 0.5563 to .05868). Throughout the equalizer of the decade of the 1970s, the rank of the Franc trended downward. The exchange rate range in 1979 was 0.4249 to 0.4349. The value of the Franc continued to tumble through the first-half of the 1980s. The exchange rate range in 1985 was 0.3255 to 0.3281. While the value of the Franc continued to decomposition during the last-half of the 1980

Burtle, J. F. (1995). Foreign exchange management. (3rd ed.). sore York: McGraw-Hill Book Company.

Humpage, O. F., & Karamouzis, N. V. (1986). A correct value for the dollar? stinting Commentary, (1 January), 1-4.

Both actual and PPP projected currency exchange rates for the French Franc and German Deutschmark for the 197501994 period are illustrated graphically in chart form. This chart may be found on the following page.

An increase in historical interest rates (nominal interest rates adjusted for inflation) in a country's economy is expected to attract alien capital, which, in turn, will cause the value of the country's currency to increase in foreign currency exchange. Conversely, a decrease in realistic interest rates is expected to cause the value of a country's currency to decrease in international currency exchange markets. Changes in foreign interest rates affect the foreign currency value of a country's currency in a manner exactly the opposite of the effect caused by changes in domestic interest rates. Changes in foreign interest rates are expected to draw funds away from a country's economy, and, in turn, cause the foreign currency exchange value of the country's currency to decrease.

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