The “law of one price” holds that identical goods should trade for the same price in an efficient market. But to what extent does it actually hold internationally? Continue reading
Everyone knows prices in the U.S. vary regionally, just like certain products are cheaper in China, say, or far cheaper in the Ukraine. But that hardly demonstrates that the renminbi or hyrvnia currencies are overvalued, Paul Solman says, noting that The Economist’s Big Mac index seems to link the wealth or poverty of countries to the price of a Big Mac, not to manipulation of exchange rates. Continue reading
When the U.S. enters into free-trade agreements, are there any rules prohibiting manipulation of foreign exchange rates?
Question/Comment: When the U.S. enters into free-trade agreements, are there any rules prohibiting manipulation of foreign exchange rates? I thought the purpose of floating rates set by the market was to adjust for imbalances in trade. Obviously, that is not … Continue reading