Sample Business Studies Paper on The purchasing power parity and exchange-rate

The purchasing power parity and exchange-rate

Background

The value of a country’s currency is often considered as the most important price in the economy. Exchange-rate changes can significantly affect the profitability of exporters, the prices paid by consumers, as well as complicating the comparison of the economies of different countries. In line with this expectation, you are required to examine how the evolving of price different of two country (for example, US and EUR or any other pairs) affects the value of currency.

Data required:

Quarterly

(1) Exchange rates (bilateral exchange rate of Canadian dollar and US dollar)

(2) Domestic price index (Consumer Price Index of Canada)

(3) Foreign price index (Consumer Price Index of US)

You expected to collect these data for period from 2000 through 2022.

Analysis:

Do correlation Analysis

parity conditions can be tested by running the simple linear regression:

             s_t  = b₀ +  b₁ (p_t – p_t^*) +  u_t

Pt is the cpi for domestic market

Pt *  CPI for foreign markets

Parity holds when the data cannot reject a null hypothesis where b₀ = 0, b₁ = 1, and the error terms have classical properties.

 

 

Format:

Abstract

Introduction: background about the ppp and exchange and their relationship

Literature Review (review at least 5-6 articles written

Data description and methods of analysis

Findings and Discussions

Conclusion