Real Factor Theory: Technical Innovations in Tradable Sector Only PPP Price of Tradable goods↓ FOREX E↓ (PT↓) X↑ Supply↑ → holds Price of Non-Tradable PPP does Technical Innovation goods↑ not hold only in Tradable (PNT↑) Sector Pf/P Partial more or PPP No change in Overall less Price Level Ratio, or small q=E*Pf/P constant, fall ↓ or small (P = PT + PNT) fall
Real Factor Theory: Technical Innovations in Tradable Sector Only Technical Innovation only in Tradable Sector → Price of Tradable goods↓ (PT↓) X↑ FOREX Supply↑ E↓ PPP holds Price of Non-Tradable goods↑ (PNT↑) PPP does not hold No change in Overall Price Level Ratio, or small fall (P = PT + PNT) Pf/P more or less constant, or small fall Partial PPP q=E*Pf/P ↓
Summary%20of%20Impacts%20of%20Changes%20in%20Various%20Variables%20on%20FOREX%20Rates.docx