Relative PPP indicates that the percentage appreciation of the euro should have been 14.64% – 5.24% = 9.4%, to a value of 2.016(1.094) = 2.2055. The actual rate of exchange is 2.348, meaning that it takes more Lira to purchase each euro than predicted by relative PPP. Based on this the euro is overvalued, by (2.348 – 2.2055)/2.2055 × 100 = 6.46%.
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