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ERIC Number: EJ836130
Record Type: Journal
Publication Date: 2009
Pages: 16
Abstractor: As Provided
ISSN: ISSN-0022-0485
A Classroom Experiment on Exchange Rate Determination with Purchasing Power Parity
Mitchell, David T.; Rebelein, Robert P.; Schneider, Patricia H.; Simpson, Nicole B.; Fisher, Eric
Journal of Economic Education, v40 n2 p150-165 Spr 2009
The authors developed a classroom experiment on exchange rate determination appropriate for undergraduate courses in macroeconomics and international economics. In the experiment, students represent citizens from different countries and need to obtain currency to purchase goods. By participating in an auction to buy currency, students gain a better understanding of currency markets and exchange rates. The implicit framework for exchange rate determination is one in which prices are perfectly flexible (in the long run) so that purchasing power parity (PPP) prevails. Additional treatments allow students to examine the effects of price changes, tariffs, and nontradable goods on the exchange rate and to explore the possible resulting deviations from PPP. The experiment is suitable for classes of 8 to 50 students and can be run in as short a period as 30 minutes. (Contains 17 notes.)
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Publication Type: Journal Articles; Reports - Descriptive
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A