Q: Three years ago the USD/RUB exchange rate was 77.37 and today the exchange rate now sits at USD/RUB 92.58. Three years ago the USD/INR exchange rate wa 74.71 and today the exchange rate now sits at USD/INR 83.30. Russian inflation has been at rates of 9.2%, 11% and 7.7% over the last 3 years. In India, the inflation rates have been 5.5%, 6.7% and 5.7%. (a) Has the RUB appreciated or depreciated against the INR over the last 3 years? (b) What is the total percentage change of the RUB against the Indian Rupee in nominal terms over the last 3 years. (c) Calculate today's real FX value of the RUB against the Indian Rupee adjusted for the past three year's inflation differential (show all working). Your goal is to find a value comparable to the exchange rate three years ago. (d) Has the RUB appreciated or depreciated in real terms over the three-year period against the Indian Rupee? You must demonstrate and explain how it is that you know this. By how much has the RUB's value changed in real terms (answer as a percentage)? (e) What does the result in part (d) imply for an exporter located in Russia trying to sell to India?
Q: Three years ago the USD/RUB exchange rate was 77.37 and today the exchange rate now sits at USD/RUB 92.58. Three years ago the USD/INR exchange rate wa 74.71 and today the exchange rate now sits at USD/INR 83.30. Russian inflation has been at rates of 9.2%, 11% and 7.7% over the last 3 years. In India, the inflation rates have been 5.5%, 6.7% and 5.7%. (a) Has the RUB appreciated or depreciated against the INR over the last 3 years? (b) What is the total percentage change of the RUB against the Indian Rupee in nominal terms over the last 3 years. (c) Calculate today's real FX value of the RUB against the Indian Rupee adjusted for the past three year's inflation differential (show all working). Your goal is to find a value comparable to the exchange rate three years ago. (d) Has the RUB appreciated or depreciated in real terms over the three-year period against the Indian Rupee? You must demonstrate and explain how it is that you know this. By how much has the RUB's value changed in real terms (answer as a percentage)? (e) What does the result in part (d) imply for an exporter located in Russia trying to sell to India?
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 25QA
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Transcribed Image Text:Q: Three years ago the USD/RUB exchange rate was 77.37 and today the exchange rate now sits at USD/RUB 92.58. Three years ago the USD/INR exchange rate wa 74.71 and today the
exchange rate now sits at USD/INR 83.30. Russian inflation has been at rates of 9.2%, 11% and 7.7% over the last 3 years. In India, the inflation rates have been 5.5%, 6.7% and 5.7%. (a) Has
the RUB appreciated or depreciated against the INR over the last 3 years? (b) What is the total percentage change of the RUB against the Indian Rupee in nominal terms over the last 3 years. (c)
Calculate today's real FX value of the RUB against the Indian Rupee adjusted for the past three year's inflation differential (show all working). Your goal is to find a value comparable to the
exchange rate three years ago. (d) Has the RUB appreciated or depreciated in real terms over the three-year period against the Indian Rupee? You must demonstrate and explain how it is that you
know this. By how much has the RUB's value changed in real terms (answer as a percentage)? (e) What does the result in part (d) imply for an exporter located in Russia trying to sell to India?
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