“The real exchange rate is the nominal exchange rate multiplied by the ratio of the two price levels: real exchange rate = FXnominal × (PB/PA) The real exchange rate tells us the exchange rate in terms of what is required to purchase an equivalent amount of goods based on the relative price levels.” - Schweser Are we talking about something similar to purchasing power parity here? Also, in the formula above, the Real exchange rate is in direct notation or indirect notation? Thanks in advance folks.

Not really b/c this formula is just for the real exchange rate at a particular point in time. PPP shows how spots are expected to be in the future. However if we were to look at how these PB and PA baskets were to change in the future that may be thought of as Absolute PPP. Can anyone verify that?