The PPP theory is a strong predictor of short-run movements in exchange rates covering time spans of five years or less.

Name: The PPP theory is a strong predictor of short-run movements in exchange rates covering time spans of five years or less.
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The PPP theory is a long-run predictor of exchange rates, covering periods of over five years. In the short run, other factors such as interest rates, political events, and market sentiment can have a greater impact on currency values.

The PPP Theory Is a Strong Predictor of Short-Run Movements