Preparing a report to answer the following question.

Aim: This group coursework (CW) aims to assess your ability to critically review
one of the most important theories in International Finance, the Purchasing Power
Parity (PPP), and your analytical skills to examine its validity in emerging markets.
CW Description: Aston Emerging Markets Fund (AEMF) is a UK based
investment fund specialising in emerging markets. You have recently started your
new job at AEMF as one of their research assistants. Your boss, Alan Davies,
thinks that it is inevitable that Turkey will soon join the European Union. If this
happens, stock prices in Turkey will boom. Hence, he believes that it makes
sense to invest in the Turkish stock market. However, Mr Davies is also
concerned about the volatility of the exchange rate of the Turkish lira. Hence, he
would like to understand what drives this volatility. He thinks that Purchasing
Power Parity (PPP) may be holding at least to some extent as inflation rates in
Turkey are much higher than in the UK
Your task consists of preparing a report to answer the following question. Does
PPP hold for the Turkish lira-pound sterling exchange rate?

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