<p>The value of <code>$100</code> in 2000 in German Currency increased to <code>$155.82</code> due to inflation (refer: <a href="https://www.inflationtool.com/euro-germany/2000-to-present-value?amount=100&amp;year2=2023&amp;frequency=yearly" rel="nofollow noreferrer">Value of 2000 Euro (Germany) today - Inflation Calculator</a>)</p>
<p>The value of <code>$100</code> in 2000 in Indian Currency increased to <code>$417.56</code> due to inflation (refer: <a href="https://www.inflationtool.com/indian-rupee/2000-to-present-value?amount=100&amp;year2=2023&amp;frequency=yearly" rel="nofollow noreferrer">Value of 2000 Indian Rupees today - Inflation Calculator</a>)</p>
<p>The exchange Rate between INR and EURO in the period from 2000 to 2023 changed by +(89.72-42.89)/42.89 = +109.18% (Refer: <a href="https://www.statista.com/statistics/412830/euro-to-indian-rupee-average-annual-exchange-rate/" rel="nofollow noreferrer">Euro to INR history Feb 2000 - Jun 21, 2023  Statista</a>)</p>
<h2>Request</h2>
<p>What general conclusions can we draw from these statements? (explanations with assumptions would be nice)</p>
<hr />
<h2>My attempt</h2>
<p>The value of Indian currency depreciated faster than that of German currency but the exchange rate didn't depreciate as fast. But, what does it mean? and why did this happen?</p>

CC BY-SA 4.0
2023-12-18T00:14:58.887Z
It does not mean much. FX is not following inflation differentials closely over time, unless inflation is substantial, which it was not in either country. FX is influenced by a lot of factors besides inflation and ultimatley follows more or less a random walk. [This quant stack exchange](https://quant.stackexchange.com/a/67940/54838) offers a good overview of the literature. It also depends a lot on your time period. Try picking July 2001 until September 2009. The picture is very different and INR "should" have depreciated about 27% less, if inflation were all that matters.
AKdemy
CC BY-SA 4.0
2023-12-18T07:26:14.657Z
May be instead of picking up a particular value in time, I should have used moving averages as there is a lot of fluctuation.
Porcupine
<inflation><exchange-rates><euro-area><germany>
Exchange rate and Inflation: Conclusions
Porcupine
# Exchange rate and Inflation: Conclusions

(Asked by: username_0 on 2023-12-11)

The value of `$100` in 2000 in German Currency increased to `$155.82` due to inflation (refer: [Value of 2000 Euro (Germany) today - Inflation Calculator](https://www.inflationtool.com/euro-germany/2000-to-present-value?amount=100&year2=2023&frequency=yearly))

The value of `$100` in 2000 in Indian Currency increased to `$417.56` due to inflation (refer: [Value of 2000 Indian Rupees today - Inflation Calculator](https://www.inflationtool.com/indian-rupee/2000-to-present-value?amount=100&year2=2023&frequency=yearly))

The exchange Rate between INR and EURO in the period from 2000 to 2023 changed by +(89.72-42.89)/42.89 = +109.18% (Refer: [Euro to INR history Feb 2000 - Jun 21, 2023 Statista](https://www.statista.com/statistics/412830/euro-to-indian-rupee-average-annual-exchange-rate/))

## Request

What general conclusions can we draw from these statements? (explanations with assumptions would be nice)

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## My attempt

The value of Indian currency depreciated faster than that of German currency but the exchange rate didn't depreciate as fast. But, what does it mean? and why did this happen?

**Tags:** inflation, exchange-rates, euro-area, germany

> **Comments:**
> **username_1**: It does not mean much. FX is not following inflation differentials closely over time, unless inflation is substantial, which it was not in either country. FX is influenced by a lot of factors besides inflation and ultimatley follows more or less a random walk. [This quant stack exchange](https://quant.stackexchange.com/a/67940/54838) offers a good overview of the literature. It also depends a lot on your time period. Try picking July 2001 until September 2009. The picture is very different and INR "should" have depreciated about 27% less, if inflation were all that matters.  
> **username_0**: May be instead of picking up a particular value in time, I should have used moving averages as there is a lot of fluctuation.  

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## 0 answers

