Purchasing Power Parity Model Fails to Predict Exchange Rates in Developing Countries
The article studied foreign exchange rates in developing countries using the Purchasing Power Parity model. They tested the model on countries in the Americas, Africa, Asia, and the Middle East from 1965 to 2015. Different price indexes and exchange rates were used. The researchers found that only four combinations supported the theory, indicating that they could not confirm Purchasing Power Parity in these countries.