tianxin

yes i agree. i think it may have something to do with the real exchange rates. in the econ chapter i think we assume real exchange rates are constant. so you can do PPP becuae you assume the change in nominal rate is compeltely explained by inflation.

i say this because i think i noticed that in the PM material there was a Q that said real exchange rates hold, and in that QW, PPP could be successfully used to get the same nominal spot rate in the future as was provided. in the Q above,. there is no mention of that.