can purchase power partity be S * ( 1+ Inflation on F)/ ( 1+Inflation on D ) one question solved based on the above, when to use it like this ???
If you have an indirect quote, then yes, relative PPP can be solved this way. Just remember to match the numerator to the numerator and denominator to denominator. If USD is the numerator of the quote, the USD rate should be in the numerator of the rate fraction.
The way I solve it is /Pound = is domestic Pound is foreign /pound = spot x (1+inflation )/(1+inflation pound) The only time i use foreign in the numerator is when calculating real exchange rate (i.e using Price Levels) I hope this helps.