Purchasing Power Parity and International Fischer Effect: Apple INC

Just three paragraphs, to the point with references: EASY!

Examine trade barriers between the United States and a specific market, and their impact on PPP (Purchasing Power Parity: a theory stating that the exchange rate between 2 countries should be equal to the ratio of the countries price levels of a commodity basket), IFE (International Fischer Effect: a theory stating the expected change in the spot exchange rate between 2 countries is the difference in the interest rate between 2 countries), the IFE, and currency values.

There are some trade barriers and also trade agreements governing the movements of goods and services among U.S. and other markets. From our theory, we have learned that changes in international prices are impacted by inflation differences and their impacts on exchange rates. Both PPP and the IFE are impacted by the changes in inflation. Inflation, in turn, is impacted by trade barriers.

In your initial post, address the following:

  • What market have you selected (Apple INC) and what are 2-4 of the trade barriers between the United States and your Taiwan? Do not need to provide an overview of the country.
  • If these trade barriers were removed, how would it impact the PPP and the IFE? Would they be more likely to hold? Please explain.
  • What are the impacts of trade barriers on currency values? Do trade barriers impact currency valuations? Briefly explain.

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