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Analysis of currency exchange rate trends in us, EU and Japan from purchasing power parity

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Note: Theoretically, purchasing power parity (the ratio of two countries' price level) as a balanced exchange rate is a long-t
 Theoretically, purchasing power parity (the ratio of two countries' price level) as a balanced exchange rate is a long-term factor affecting exchange rate. When the exchange rate is long below the purchasing power parity, it means that the currency exchange rate is overestimated, indicating the future trend of devaluation; when the exchange rate is longer than the purchasing power parity, it means that the currency exchange rate is undervalued, indicating the trend of appreciation in the future. Market exchange rate is influenced by short-term factors such as the relationship between supply and demand, monetary policy, capital speculation and other short-term factors, frequently fluctuating and fluctuating, and the purchasing power parity mainly depends on the influence of the factors of price changes in various countries and is relatively stable for a certain period of time. Exchange rates always fluctuate around purchasing power parity. Because there are a large number of non tradable goods and services in various countries, the market economic conditions are different. The theory of purchasing power parity is hard to meet the conditions of full opening, full trade and fully effective market economy. As a balanced exchange rate, the purchasing power parity is an ideal value that can not be measured. The purchasing power parity calculated through the international comparison project (ICP) is just a currency conversion factor in GDP international comparison, not a full sense equilibrium exchange rate. The data analysis shows that trade goods and services are significant to the GDP in developed market economies such as the United States, the euro zone and Japan, and the correlation between the purchasing power parity and the exchange rate is high; for most developing countries, trade goods and services are smaller, construction projects, education and medical care. The quality of non tradable goods and services, such as housing and government services, is far from the developed countries. It is difficult to calculate accurately, and the correlation between the purchasing power parity and the exchange rate is low. By using the statistical data published by the organization for economic cooperation and development (OECD), this paper focuses on the analysis of the relationship between the dollar, the euro, the yen exchange rate and the purchasing power parity. The study shows that in recent years, the exchange rate of euro and yen has been lower than the purchasing power parity, and has been seriously overestimated. In the long run, the space for the continued appreciation of the euro and yen is limited; accordingly, the space for the dollar to continue to depreciate against the euro and yen is not significant.
In the past 10 years, the purchasing power parity between the euro and yen has declined compared to the US dollar.
According to the statistics released by OECD, the purchasing power parity of euro and yen relative to the US dollar decreased year by year in the 10 years of -2009 in 2000. Among them, the euro dropped from $1 in 2000 to 0.88 euros to 0.80 euros in 2009, down by 8.6%; the yen dropped from 1 dollars in 2000 to 155 yen to 115 yen in 2009, down by 26%. That is to say, in the past 10 years, the price level of the euro area and Japan has declined compared with that of the United States, and the purchasing power of the euro and yen relative to the US dollar has increased. Buying the same quantity and quality of goods or services in the United States needs $100 in the United States; it needs 88 euros 10 years ago in the euro zone and 80 dollars in 10 years; it needs 155 yen in Japan 10 years ago and only 115 yen after 10 years.
In the past 10 years, domestic consumer prices and producer prices in the euro area and Japan are lower than the United States, which is the main cause of the decrease in the purchasing power of the euro, the yen and the dollar, and the increase in the purchasing power of the currency. From the change of consumer price (CPI), in the 10 years, CPI in the United States increased by 2.6% annually, the euro area rose by 2.1%, while Japan decreased by 0.3%, basically in deflation. From the change of producer price (PPI), in the 10 years, the US PPI increased by 2.7%, the euro area rose by 2.4%, and Japan increased by 0.2%. In the past 10 years, the purchasing power parity of euro and Japanese yen is declining, which is the inevitable result of the increase of CPI and PPI in the United States than in the euro zone and Japan, and the trend of the two changes is consistent. Theoretically, the downward trend of euro and yen relative to us dollar purchasing power parity requires that its currency exchange rate appreciate accordingly.
Over the past 10 years, the euro has generally appreciated the exchange rate against the US dollar and the yen against the US dollar, which generally reflects the demand for the change of purchasing power parity.
During the 10 years from 2000 to 2009, the exchange rate of euro and yen relative to the dollar was influenced by short-term factors such as the relationship between supply and demand, the change of interest rate, policy intervention, speculation and so on. In general, the euro and yen show an upward trend, which generally corresponds to the trend of purchasing power parity. In addition to devaluation in the early start of the start, the euro's exchange rate against the US dollar has been appreciating year by year in the following 9 years, from $1 in 2001 to 1.12 euros, to 0.72 euros in 2009, and an increase of 55.6% in the euro. In 10 years, the yen exchange rate experienced a dramatic devaluation, a stable to a dramatic rise in the dramatic upheaval, from 1 US dollars in 2000 and 2001 to 107.8 yen and 121.5 yen, to 93.6 yen in 2009, and a 15.2% appreciation in the yen compared to 2000, and 30% more than in 2001. In 3 years from 2000 to 2002, because of the deterioration of the domestic economy, the yen has devalued greatly; from 2003 to 2007, the domestic economy turned better under the impetus of the world economic prosperity. The exchange rate of the yen was relatively stable; since the outbreak of the 2008 financial crisis, the yen has appreciated substantially.
The data analysis shows that there is inherent inherent correlation between the purchasing power parity and the exchange rate of the euro and Japanese yen relative to the dollar. Although the exchange rate fluctuates sharply in the short term, the long-term trend of the change is in good agreement. In the past 10 years, the euro and yen have shown an upward trend in volatility, reflecting the basic requirement for the decline in purchasing power parity.
In recent years, the degree of deviation between the euro, the yen relative to the dollar and the purchasing power parity has continued to expand, and the space for the continued appreciation of the euro and the yen and the continued devaluation of the dollar is limited.
Data show that there are many short-term causes
 
 
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