Jim Whitney Economics 311

Evidence regarding purchasing power parity
Nominal versus Real Exchange Rate Indexes
US Dollar vesrus selected transition economy currencies, 1995-2001

a b c d e f g h i
Country Currency Nominal exchange rate (E)
Currency per US$		 CPI
(1995=100)		 Real exchange rate (R)
Currency per US$,
1995 prices		 Exchange rate index,
2001
1995=100
1995 2001 2001 1995 2001 Nominal (E) Real (R)

Formula

         c*100/100 d*116/e 100*d/c 100*g/f
United States US Dollar --- --- 116 --- --- --- ---
Latvia Lat .528 .628 144 .528
.528*100
100		 .506
.628*116
144		 119
100*.628
.528		 96
100*.506
.528
Czech Republic Koruny 26.541 38.035 145 26.541
26.541*100
100		 30.428
38.035*116
145		 143
100*38.035
26.541		 115
100*30.428
26.541
Slovak Republic Korony 29.713 48.355 159 29.713      
Estonia Krooni 11.465 17.564 167 11.465      
Poland Zloty 2.4250 4.0939 192 2.4250      
Georgia Lari 1.2300 2.0730 201 1.2300      
Hungary Forint 125.681 286.490 244 125.681      
Russia Ruble 4.5592 29.1685 590 4.5592      
Romania Lei 2033.3 29060.8 1607 2033.3      
Bulgaria Leva .0672 2.1847 3701 .0672      

 

Ranges:   Percentage change in US$ exchange rates
  Inflation Nominal Real
Low 44% - Latvia    
High 3601% - Bulgaria    

Key formulas:
    (1) Real exchange rate: R = (E * Pdom) / Pfor, where P=CPI.
    (2) Index numbers, 2001 versus 1995 = 100 * (2001 value / 1995 value)

    Tip: For relatively small percentage changes, you can approximate the percentage change in the real exchange rate with the following formula:
   %DR = %DE + %DPdom + %DPfor