Purchasing Power Parity and International Commodity Arbitrage Foreign exchange refers to two different things. The first is currency claims expressed in the equivalent value in foreign money. The second is actual transactions involving the conversion of money of one country into that of another. Foreign exchange is necessary because different countries have different monetary units. One country’s currency typically cannot be used in another country. The determination of the price at which the currency of one country will be or should be exchanged for that of another country is the basis of this and many other essays and studies. Foreign exchange is a commodity, and its price fluctuates based on supply and demand, like any commodity. This is not the place for a complete discussion of supply and demand as relates to foreign exchange, but for our purposes, we will assum....

Number Of Pages: 6

Number Of Words: 1434

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