Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please solve and no reject, this is not essayyy. Please to solve thank u
THE DATA
| Exchange Rate | Real |
Rates of Inflation (%) | Interest Rate (%) | ||||
| USD/AUD | United States | Australia | United States | Australia | United States | Australia | |
| 30/03/2021 | 0,760 | 0,547% | 1,278% | 1,894% | 0,943% | 1,328% | 1,406% |
| 30/12/2020 | 0,769 | -2,263% | -0,929% | 1,211% | 0,861% | 0,856% | 0,886% |
| 30/09/2020 | 0,717 | -2,888% | -3,646% | 1,261% | 0,693% | 0,643% | 0,879% |
| 30/06/2020 | 0,689 | -9,084% | -6,204% | 0,430% | -0,261% | 0,682% | 0,899% |
| 30/03/2020 | 0,616 | 0,631% | 1,389% | 2,099% | 2,279% | 1,359% | 1,002% |
| 30/12/2019 | 0,700 | 2,569% | 2,138% | 2,026% | 1,842% | 1,790% | 1,129% |
| 30/09/2019 | 0,674 | 2,318% | 1,926% | 1,763% | 1,674% | 1,793% | 1,104% |
| 28/06/2019 | 0,702 | 2,111% | 1,650% | 1,849% | 1,502% | 2,335% | 1,636% |
| 29/03/2019 | 0,710 | 2,153% | 1,931% | 1,608% | 1,242% | 2,649% | 2,115% |
| 28/12/2018 | 0,704 | 2,321% | 2,374% | 2,217% | 1,695% | 3,043% | 2,609% |
| 28/09/2018 | 0,724 | 3,053% | 2,703% | 2,612% | 1,977% | 2,922% | 2,621% |
| 29/06/2018 | 0,739 | 3,296% | 3,247% | 2,683% | 2,074% | 2,919% | 2,744% |
| 30/03/2018 | 0,767 | 3,015% | 3,077% | 2,226% | 1,991% | 2,753% | 2,775% |
| 29/12/2017 | 0,782 | 2,718% | 2,452% | 2,115% | 2,095% | 2,370% | 2,647% |
| 29/09/2017 | 0,785 | 2,267% | 3,018% | 1,969% | 1,830% | 2,238% | 2,649% |
| 30/06/2017 | 0,767 | 2,147% | 2,080% | 1,919% | 1,930% | 2,254% | 2,502% |
| 30/03/2017 | 0,767 | 1,885% | 2,122% | 2,551% | 2,126% | 2,443% | 2,765% |
| 30/12/2016 | 0,724 | 2,004% | 2,732% | 1,807% | 1,385% | 2,129% | 2,491% |
| 30/09/2016 | 0,765 | 1,648% | 2,274% | 1,157% | 1,391% | 1,561% | 1,928% |
| 30/06/2016 | 0,745 | 1,368% | 3,230% | 1,110% | 1,021% | 1,746% | 2,315% |
| 30/03/2016 | 0,770 | 1,648% | 2,685% | 0,992% | 1,311% | 1,908% | 2,586% |
| 30/12/2015 | 0,729 | 1,875% | 2,689% | 0,400% | 1,690% | 2,182% | 2,773% |
| 30/09/2015 | 0,702 | 2,183% | 2,474% | 0,159% | 1,411% | 2,217% | 2,772% |
| 30/06/2015 | 0,769 | 3,040% | 1,886% | 0,037% | 1,508% | 2,158% | 2,758% |
| 30/03/2015 | 0,764 | 3,761% | 2,248% | -0,113% | 1,328% | 1,961% | 2,540% |
| 30/12/2014 | 0,820 | 2,564% | 2,084% | 1,164% | 1,622% | 2,268% | 3,181% |
| 30/09/2014 | 0,875 | 2,831% | 2,559% | 1,791% | 2,310% | 2,488% | 3,476% |
| 30/06/2014 | 0,944 | 2,452% | 2,877% | 2,080% | 3,110% | 2,613% | 3,833% |
| 28/03/2014 | 0,924 | 1,294% | 2,776% | 1,430% | 2,930% | 2,758% | 4,136% |
| 30/12/2013 | 0,891 | 2,532% | 2,387% | 1,207% | 2,745% | 2,731% | 4,106% |
| 30/09/2013 | 0,935 | 1,920% | 2,087% | 1,505% | 2,264% | 2,697% | 3,865% |
| 28/06/2013 | 0,915 | 1,296% | 1,865% | 1,415% | 2,388% | 1,973% | 3,327% |
| 29/03/2013 | 1,043 | 1,616% | 2,193% | 1,740% | 2,503% | 1,934% | 3,468% |
| 28/12/2012 | 1,038 | 1,566% | 2,835% | 1,904% | 2,102% | 1,693% | 3,105% |
| 28/09/2012 | 1,040 | 2,593% | 3,472% | 1,685% | 1,906% | 1,626% | 3,057% |
| 29/06/2012 | 1,025 | 2,374% | 4,237% | 1,888% | 1,208% | 1,806% | 3,358% |
| 30/03/2012 | 1,036 | 2,600% | 4,677% | 2,829% | 1,524% | 2,027% | 3,980% |
| 30/12/2011 | 1,025 | 1,523% | 3,439% | 3,345% | 2,990% | 2,036% | 4,101% |
| 30/09/2011 | 0,972 | 0,918% | 3,312% | 3,716% | 3,423% | 2,398% | 4,553% |
| 30/06/2011 | 1,071 | 1,738% | 2,640% | 3,346% | 3,653% | 3,189% | 5,326% |
| 30/03/2011 | 1,031 | 2,031% | 1,976% | 2,148% | 3,361% | 3,443% | 5,516% |
| 30/12/2010 | 1,012 | 2,788% | 2,761% | 1,230% | 2,646% | 2,848% | 5,337% |
| 30/09/2010 | 0,968 | 3,349% | 2,474% | 1,203% | 2,882% | 2,768% | 5,041% |
| 30/06/2010 | 0,845 | 2,927% | 2,080% | 1,775% | 3,011% | 3,472% | 5,527% |
| 30/03/2010 | 0,919 | 1,768% | 2,123% | 2,353% | 2,919% | 3,703% | 5,557% |
| 30/12/2009 | 0,893 | 0,082% | 2,643% | 1,488% | 2,052% | 3,448% | 5,462% |
| 30/09/2009 | 0,883 | -3,138% | 1,426% | -1,607% | 1,188% | 3,500% | 5,449% |
| 30/06/2009 | 0,808 | -3,995% | 1,889% | -0,942% | 1,528% | 3,298% | 5,029% |
| 30/03/2009 | 0,680 | -3,282% | 1,553% | -0,184% | 2,323% | 2,711% | 4,226% |
| 30/12/2008 | 0,691 | -2,540% | 1,675% | 1,596% | 3,695% | 3,227% | 4,802% |
| 30/09/2008 | 0,789 | 0,242% | 2,640% | 5,253% | 4,989% | 3,848% | 5,966% |
| 30/06/2008 | 0,960 | 1,380% | 3,009% | 4,310% | 4,447% | 3,866% | 6,366% |
| 28/03/2008 | 0,919 | 1,447% | 3,372% | 4,137% | 4,268% | 3,659% | 6,153% |
| 28/12/2007 | 0,877 | 2,161% | 3,724% | 4,031% | 2,999% | 4,267% | 6,137% |
| 28/09/2007 | 0,885 | 2,399% | 4,557% | 2,349% | 1,848% | 4,734% | 6,020% |
| 29/06/2007 | 0,848 | 1,939% | 4,940% | 2,665% | 2,095% | 4,846% | 6,011% |
| 30/03/2007 | 0,808 | 1,541% | 4,505% | 2,432% | 2,482% | 4,676% | 5,804% |
| 29/12/2006 | 0,788 | 2,609% | 3,197% | 1,965% | 3,337% | 4,625% | 5,651% |
| 29/09/2006 | 0,746 | 2,328% | 2,721% | 3,340% | 3,837% | 4,896% | 5,738% |
| 30/06/2006 | 0,743 | 2,977% | 2,307% | 3,924% | 3,995% | 5,063% | 5,698% |
| 30/03/2006 | 0,714 | 3,225% | 2,587% | 3,691% | 3,045% | 4,577% | 5,279% |
| 30/12/2005 | 0,734 | 2,983% | 3,179% | 3,675% | 2,693% | 4,487% | 5,395% |
| 30/09/2005 | 0,764 | 3,448% | 3,114% | 3,820% | 3,090% | 4,215% | 5,202% |
| 30/06/2005 | 0,762 | 3,607% | 2,792% | 2,923% | 2,481% | 4,159% | 5,299% |
| 30/03/2005 | 0,773 | 3,909% | 3,019% | 3,035% | 2,369% | 4,304% | 5,476% |
| 30/12/2004 | 0,777 | 3,356% | 3,058% | 3,385% | 2,638% | 4,177% | 5,348% |
| 30/09/2004 | 0,724 | 3,491% | 3,968% | 2,675% | 2,276% | 4,301% | 5,568% |
| 30/06/2004 | 0,697 | 4,235% | 4,927% | 2,786% | 2,545% | 4,597% | 5,869% |
| 30/03/2004 | 0,755 | 4,353% | 4,578% | 1,818% | 1,906% | 4,010% | 5,570% |
Transcribed Image Text:International Parity Conditions/PPP Theory Assignment Questions
We will focus on the US and Australia. Refer to the attached Excel file
which has key macroeconomic data for both countries.
1.
Use the realised rates of inflation for both countries from 2004Q1 to
2021Q1 to calculate the USD/AUD exchange rate according to relative
PPP. In other words, suppose we are in 2004Q1, and we want to forecast
the USD/AUD exchange rate one year ahead. Repeat for each quarter in
the sample period. How well does this international parity condition
explain the USD/AUD exchange rate? You will need to compare the
RPPP-implied exchange rate with the realised exchange rate. Plot the two
time series in a graph and report the average disparity between the two.
Are there any periods where there is a large disparity between the realised
exchange rate and the RPPP-implied exchange rate? Provide commentary
as to the reasons
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