From: han@anadolu.michigan.com (hasan.b.mutlu)
Newsgroups: soc.culture.turkish,talk.politics.mideast,talk.politics.soviet,soc.culture.soviet,soc.culture.greek,soc.culture.europe
Subject: The Delinking Of Exchange Rates From Reality And 'Radu.'
Date: 10 Apr 92 05:21:00 GMT


<rvr8tINNnac@agate.berkeley.edu>
160955r@garnet.berkeley.edu

>Hasan (or whatever you name is)!  

Lighten up, 'Tomescu at UCBerkeley.'

>I am not confusing the two things (that have
>nothing to do with each other) The Law of One Price (Say) has nothing to do
>with comparing living standards between countries...It eventually dawned 
>upon me that you prattle about things you have idea whatsoever about. 

You make yourself laugh purposely? Why might the 'Law of One Price'
not work? Because of transportation cost (remember the distance
between two countries), tariffs (remember the EC's protective measures),
bundling of goods, etc. Keep in mind this may have nothing to do with
international factors. Also the presence of nontraded goods makes it
more likely that consumption bundles will differ because consumers
in two countries face different price levels. Are you with me so far?

>Saying that my
>previuos posting implied a confusion between PPP and the Law of One Price is
>equivalent to saying that the Archaeopterix is made in the USA or some other
>incomprehensible gibberish...

You'll only be embarrassed. If there is a high correlation between the 
price of goods produced in a country and the price of goods consumed
in a country, PPP implies no change in price competitiveness. Don't
you know anything about 'Cassell's Argument?' Are you for real?

>What the hell have Ricardo (theory of comparative advantage) and Krugman
>(monopolistic theory of trade) have to do with believing in PPP? By the
>way, PPP is conditioned by stability in long run real exchange rates. 

It is a myth; no wonder you are in such a mess. Both versions of
PPP (Absolute and Relative) say there is no change in price
competitiveness. That's all.

>But what am I doing here? Arguing with you? Sorry! 

Aren't you lucky?

>Also, Obstfeld wrote
>the book you quoted as a text-book. He wanted to exemplify how PPP works.

How do I love thee? Let me count the ways. How well does PPP work? Simply 
plot the inflation differential and the exchange rate changes (or dollar 
depreciation) for U.K., France, Canada, Germany and Japan between 1975 
and 1989 and provide us with your findings. You call yourself an expert? 
Change your school.

>It in that precise context he meant that Greece and Turkey are  comparable,
>i.e. quoting the result mf the model he intended to teach. Believe me,
>nobody, but nobody in the Economics world believes that PPP is a good
>measure, given trade imperfections, exchange rate volatility, etc.

Believe me, all your article reflects is your abundant ignorance.
Start with Dornbusch, Miskin and Huizinga, 'joker.' 

>Oh God, not again! Hasan ! Listen to this: absolute PPP states nothing else
>except that domestic price level is equal to the foreign price level *
>by the exchange rate. The relative PPP states the same thing, in quotients.
>What has this to do with the law of one price? Or to what I actally said?

Wrong again. Absolute PPP says R = 1; relative PPP says R = constant.
Relevant question: Is the 'Law of One Price' sufficient to guarantee
absolute PPP? What is the relevant answer? What is the major advantage
of relative PPP?

>>What does this have anything to do with the PPP? Wish to hear Turkiye's
>>competitiveness in ceramics and petrochemicals?

>It has nothing to do with PPP, of course. It has a lot to do with the 
>ORIGINAL  question, i.e. the living standards in the two countries..

Geeez. How about the difference in tastes or nonhomothetic preferences, 
given that consumers in two countries face the same relative prices? 

>There is nothing to challenge in neither "Obstfeld" or "Krugman", who, I can
>assure you are unbiased enough not to believe that living standards in Greece
>and Turkey are comparable. Now that you are into economics I suggest you read a
>few things about the inapolicability of PPP and why it can not be possibly
>tested, etc. etc.

Please don't make me laugh and just plot the data. Anxiously awaiting,
of course.

>Also, I think I will follow the advice of other people on the net and include
>your ID in my kill file. Think of it Hasan: we are here to exchange information
>just publishing your "works"!  Adios, hasan B. Mutlu. I won't miss you and your
>schizophrenic postings....

The person who wants to do something finds a way; the other kind finds
an excuse. It has been fun sharing these thoughts with you and I hope
you've enjoyed reading them. More than that, I hope you will profit 
from learning and using the skills and they will make your life richer,
both materially and in satisfaction and pride. But, please change your
school.

Hasan B-) Mutlu

                     'Kill Turks and Kurds wherever you find them 
                      and in whatever circumstances you find them. 
                      Turkish children also should be killed as 
                      they form a danger to the Armenian nation.' 
                                     (Hamparsum Boyadjian - 1914)