EFTA Document EFTA01458627

11 September 2015 Asset Allocation real value of exchange rates over long periods, i.e., deviations are long lived but cyclical and mean reverting. But EM FX by contrast is massively structurally (always) cheap on a PPP basis, given their earlier stage of economic development. EM real exchange rates will likely converge to PPP only with the convergence of per capita incomes, i.e., in the very very long run. So the cheapness of EM FX on a PPP basis is not cyclical but structural (How Much