Value of the exchange rate went from brazilian reals

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Reference no: EM131285939

Given the following information is for Brazil and the U.S. over the past year.

Brazil

GDP Growth = -3.5%

Short term interest rate = 11.84%

Consumer price inflation = 8.0%

United States

GDP Growth = 1.7%

Short term interest rate = 1.58%

Consumer price inflation = 1.4%

The value of the exchange rate went from Brazilian Reals 3.47/US$ last year to Brazilian Reals 3.19/US$ last week. Is this what should have happened according to Relative Purchasing Power Parity over the past year? Why? Be specific.

Reference no: EM131285939

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