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According to the table from this website, these are countries that peg their currencies to the Euro: Bosnia and Herzegovina Bulgaria Comoros Denmark Sao Tome and Principe Other than these, Bhutan fixes their exchange rate to the Indian rupee, Lesotho and Namibia fix their exchange rates to the South African rand.


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Let $P$ denote the price in the home country, $E$ represent units of domestic currency used to buy one unit of foreign currency, and $P^{*}$ represent the price level in the foreign country. Now, PPP implies that: $$ P=EP^{*} $$ In other words, prices when expressed in the same currency are equalized across countries. Log-differentiate and take changes and ...


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