Purchasing power parity holds only within very broad bands (roughly 2x), and exchange rates move significantly due to financial factors like bank balance sheets and pricing imperfections rather than fundamental economic variables, making exchange rate theory one of economics' most persistent puzzles.
factualpending
Speaker
Kenneth RogoffEvidence Quote
“I think the weight of uh research the past 10 or 15 years has been that uh the exchange rate moves a lot but it's not necessarily moving around the economy with it.”
Source
Kenneth Rogoff on Monetary Moves, Fiscal Gambits, and Classical Chess | Conversations with Tyler— Mercatus CenterCreated: 8/11/2026, 7:10:38 AM
My Notes
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