If foreign exchange markets are efficient, then the relative purchasing power parity condition must hold true.

Question

Quizplus · Accepted Answer

The efficiency of foreign exchange markets does not necessarily imply that relative purchasing power parity (PPP) holds true, as market efficiency relates to the incorporation of information into prices, while PPP is a theory about the long-term equilibrium exchange rate based on price levels.

If Foreign Exchange Markets Are Efficient, Then the Relative Purchasing