the problems associated with the use of the PPP Model may be traced to the model's inability to account for factors other than inflation, which also affect currency exchange rates.
The French Franc/German Deutschmark Currency Exchange Rate Experience
The overall trend in the actual currency exchange rate for the French Franc/German Deutschmark over the 1975-1994 period has been a devaluation of the French Franc. In 1975, the Franc would buy nearly DM0.6 (the range in actual rates in 1975 was 0.5563 to .05868). Throughout the remainder of the decade of the 1970s, the value of the Franc trended downward. The exchange rate range in 1979 was 0.4249 to 0.4349. T
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