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-Purchasing Power Parity Theory and Forecasting exchange rates
Suppose you are working in investment company specializes in investing in emerging stock markets of the world and is currently interested in one of stock markets. He/she would like to understand what drives the exchange rates and thinks that the purchasing power parity may be holding at least to some extent. As a research assistant for him, you were assigned to check this out. In other words, you have to study the impact of inflation on exchange rate and prepare a report on the following question: Does the purchasing power parity hold for the Domestic Currency-U.S. dollar exchange rate?
Select a country and forecast its exchange rate based on the following steps:
1. Collect the data from the World Bank website
2. To prepare the final version, your report should have the following sections based on the MIT Guideline:
a. Title page
b. Table of Contents
e. Literature Review
f. Mathematical Model
g. Data Description
h. Econometric Model
i. Results (Empirical Findings)
l. Appendix A: Microsoft Excel Output
3. Your project must not exceed 5000 words, including diagrams, figures, tables and references.