Determination of Exchange Rates: 5 Approaches | Forex Management
The following points highlight the five main approaches used for determining exchange rates. The approaches are: 1. The Purchasing Power Parity Approach 2. The Balance of Payments and the Internal-External Balance Approach 3. The Monetary Approach 4. The Portfolio Balance Approach 5. Interest Rate Parity. 1. The Purchasing Power Parity Approach: Purchasing Power Parity (PPP) theory holds that in the [...]