Will Rupee Devalue Further? Economic roller coaster

Non Wheels Discussions

VCheng (VCheng) 2021-03-31 17:17:59 +0500 #350

Why pick the last 5 years? What is overall average depreciation from 1947 till now?

khurem (khurem) 2021-03-31 17:19:47 +0500 #351

5.31% (from 1947 to 2021).

VCheng (VCheng) 2021-03-31 17:26:05 +0500 #352

From 3.31 to 155 or thereabout is 5.3% per year?

khurem (khurem) 2021-03-31 17:32:57 +0500 #353

Yes. Over 74 years that's the average.

hussain182 (hussain182) 2021-03-31 17:34:08 +0500 #354

3.31 compounded over 74 years at rate 5.3% is 152.26

VCheng (VCheng) 2021-03-31 17:36:11 +0500 #355

How was that calculated, if I may educate myself:

https://www.dummies.com/education/finance/international-finance/how-to-calculate-the-percent-change/

https://www.calculatorsoup.com/calculators/financial/currency-appreciation-depreciation-calculator.php

https://www.sapling.com/10003494/calculate-percentage-devaluation-currency

VCheng (VCheng) 2021-03-31 17:37:14 +0500 #356

Isn't that using a simple interest formula for rate of return? Please see the links above.

hussain182 (hussain182) 2021-03-31 17:38:01 +0500 #357

No thats using compound interest formula. Which is what you need in this case

VCheng (VCheng) 2021-03-31 17:39:34 +0500 #358

Not really. There are proper calculators for currency devaluation calculations. The compound interest formula is for loans and banks return etc.

khurem (khurem) 2021-03-31 17:42:09 +0500 #359

khurem (khurem) 2021-03-31 17:43:13 +0500 #360

You may check the table I pasted. 5.33% depreciation every year from 1947 leads to the current exchange rate.

VCheng (VCheng) 2021-03-31 17:43:33 +0500 #361

Yes, that is table to be used if I put 3.31 in the bank that offered me a 5.3% interest rate on the balance. Currency devaluations are calculated differently.

khurem (khurem) 2021-03-31 17:46:00 +0500 #362

We are talking about annual depreciation rate, ain't we? This is the formula.

VCheng (VCheng) 2021-03-31 17:46:51 +0500 #363

Please take a look at some of the links I posted above.

khurem (khurem) 2021-03-31 17:50:09 +0500 #364

I have. This is the same formula that I used. For your info, although the formula in your links may appear to be different, both yield to same result. Try it yourself and let me know if you have a different depreciation / devaluation rate.

hussain182 (hussain182) 2021-03-31 17:51:37 +0500 #365

The links you have posted are using the same formula.

VCheng (VCheng) 2021-03-31 17:58:24 +0500 #366

Currency value in 1947 = 3.3
Currency value in 2020 = 155

Devaluation = 155-3.3 = 151.7

Time period 2020 -1947 = 73 years.

So the loss of PKR value is about 98%, which means a total depreciation rate of over 4500% against the USD.

(all figures approximate)

khurem (khurem) 2021-03-31 18:00:00 +0500 #367

That's the total depreciation rate over 73 years. Our argument was on average depreciation rate per year over longer term. You may re-visit your initial comment to see that. Changing the goalpost to prove your point, eh?

VCheng (VCheng) 2021-03-31 18:01:18 +0500 #368

Not really. I am trying to educate myself.

khurem (khurem) 2021-03-31 18:03:53 +0500 #369