Russia Exchange Rate PPP Analysis

This analysis explores the Purchasing Power Parity (PPP) exchange rate between the Russian Ruble (RUB) and the US Dollar (USD) using historical price level data from both countries.

Understanding PPP Exchange Rates

Purchasing Power Parity (PPP) is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to PPP, exchange rates between currencies should adjust to equalize the price of similar goods in different countries.

When a country's market exchange rate differs from its PPP rate:

If market rate > PPP rate: The currency is considered overvalued
If market rate < PPP rate: The currency is considered undervalued

This analysis calculates PPP exchange rates ending on using multiple starting periods from 1992 to present. By comparing these calculated PPP rates to the actual market exchange rate, we can assess whether the ruble is currently overvalued or undervalued relative to PPP.

Methodology

For each starting date, we calculate the PPP exchange rate at the end period () using the formula:

PPP = (RU_end/RU_start) / (US_end/US_start) × ExRate_start

Where:

RU_end and RU_start are Russian price levels at end and start periods
US_end and US_start are US price levels at end and start periods
ExRate_start is the actual exchange rate at the start period

Russia Exchange Rate PPP Analysis

Understanding PPP Exchange Rates

Methodology

Summary Statistics

Analysis

PPP Exchange Rate Distribution

PPP Rate by Starting Period

Interpretation