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Maclean’s Article on PPP and the Canadian Dollar

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Mike Moffat argues in an interesting Mclean’s magazine article that the Canadian Dollar is not necessarily overpriced simply because it is trading roughly 20% over prices implied by PPP. Mike argues that transactions costs and the indeterminacy of market prices make PPP irrelevant as a measure of the value of a currency and points out that the Loonie has been trading well above values implied by PPP for almost all of the last decade.

The article is thoughtful but we think it misses an important concept by focusing exclusively on …

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