3.The real exchange rate and relative purchasing power parity,so that the nominal exchange rate Rt t for the purpose of calculating the period of the nominal money,Pt period for the purpose of calculating the price index Vt period for the purpose of calculating the actual value of the currency name.used the same base price or value-based (as the 100) definition of the actual value (real purchasing power or real purchasing power) can be expressed as :so that the actual value of the currency,said the real effective exchange rate or exchange rate (direct price),defined as :which,are trade partners and calculation of the actual value of the currency name,the name of the currency,with the price index.As,and (4).Obviously the real exchange rate (St) is used to calculate the inflation rate reductions in the nominal exchange rate period,hence the real exchange rate is constant prices to the base period (based currency) exchange rate calculation.To (4) - to convert available (5),and its purchasing power parity formula (6),When the PPP was established,the actual exchange rate remained unchanged compared with the base period.When the PPP is not established,the real exchange rate relative to the base period,the exchange rate would have deviated from.The effective exchange rate is higher than the base period,as the real exchange rate depreciation.Instead,they were called appreciation.From the perspective of a country's import and export trade,the former favorable to export,and the latter because of the rise in the real exchange rate.in the actual purchasing power of foreign currencies,and this has led to high commodity prices and ultimately detrimental to their commodity exports.From St.= know,St.actual exchange rate calculation period of the nominal exchange rate is an important determinant of the rate of inflation which is both a π (Pt) to the endogenous variable,is a government-controlled exchange rate policy,monetary authorities exogenous variables.This means that the current nominal exchange rate for the monetary authorities is difficult to avoid the distortion of the role of exchange rate policy.For instance,monetary authorities may overestimate or underestimate the current nominal exchange rate artificially so that deviate from the real exchange rate.As et St.is an important determinant of the real exchange rate,and dSt/det>0,with the man overestimated or underestimated.St.also overestimated or underestimated,thus distorted.Originally,the real exchange rate for the purpose of the inspection is to deviate from the nominal exchange rate of the real exchange rate.In theory,this requirement in the current nominal exchange rate should be independent of the real exchange rate,however,The actual calculation of the real exchange rate determines the structure can not be independent from the current nominal exchange rate to do.If the real exchange rate to a more general definition of a balanced exchange rate,then,the real exchange rate may deviate from St.equilibrium exchange rate itself.In this sense,the real exchange rate is not as people expected,the real exchange rate can provide more accurate information.So St.after removing the effect of inflation as the purchasing power of the currency reporting period.It is used to measure the deviation from the nominal exchange rate to the purchasing power parity.Therefore,the actual rate,the nominal exchange rate and PPP as a person of the three relationships :that the name of an individual,the nominal exchange rate,the real effective exchange rate is an individual,and the PPP is that this behavior.The name can be determined by external factors,has his own character is,outside forces should not be imposed on him.When we mentioned the name of a person he thought of the various behavior,This is because such behavior has been the only manifestation of the real.So live it is a bridge connecting names and character,and character names can be determined by whether we live in line.Similarly,the actual rate of exchange is a bridge connecting the nominal exchange rate and PPP.it is used to measure the nominal exchange rate and the degree of deviation of the actual exchange rate.