Coronavirus Effects on Purchasing Power Parity and Global Economy

This report examines the economic impact of the Coronavirus, focusing on its effects on purchasing power parity, global economies, and financial markets. The analysis highlights the negative impact of the pandemic on global GDP, trade, and investment, particularly in major economies like the US and China. It also discusses the expected trends in currency and commodity markets, with a focus on the Japanese Yen, gold, and oil. The report suggests that the Yen and gold are likely to remain stable, while oil prices will continue to be affected by travel restrictions and reduced demand. The report also references the effect of the US Federal Reserve and its impact on the investor sentiment. The assignment includes references to demonstrate the basis of the analysis. This assignment is available on Desklib, a platform offering AI-powered study tools and resources for students, including past papers and solved assignments.

ECONOMICS

Coronavirus and effect on the purchasing power parity of nations
The effect of the Coronavirus on the purchasing power parity of the country would be
negative. This is because as there is an increase in the public health crisis, there is fall in the
gross domestic products worldwide, because of the shrinking productions and demand and
supply. It is to be noted that economies like China and USA are the prime contributors to the
global economic growth. These economies together with others are investing into domestic
health care sectors and are importing fewer goods, raw materials and services. The other
economies are negatively affected as well, as the demand; production and the employment
are declining drastically. The following picture depicts the same.
(Source: Global Economic Dynamics, 2020).
If the coronavirus continues to spread in the different countries, there would be further
serious impacts on the global economy because of the dangers on interconnectedness and

international mobility. Thus, the coronavirus is slowing down the world economies and
reducing the purchasing power parities of the countries in the form of the spill over effects.
Future expectations for 3-month Gold, Oil, and Japanese Yen
The national lockdowns, travel restrictions and rising health crisis continue to push the world
economies on the verge of deep recession. It is estimated that the dollar (most liquid global
currency) would continue to edge lower against the Japanese Yen, just like the present times.
The continuous aid from the US Federal Reserve has failed to boost the investor sentiments
because of the negative economic sentiments. Thus, the Yen would continue to benefit from
the point of safe business spot as of now, because the pandemic has not affected Japan much.
It is expected that as the shares of the companies are plunging down due to reduced demand
and sales, the commodity prices like that of gold would be stable and could rise in episodes
between. This is in contrast to the oil and gasoline prices due to the on-going travel
restrictions leading to the destroyed demands the fuel, as the travel and airlines industry
would continue to feel the heat (EconoTimes, 2020). Thus, it can be concluded that while
Yen and Gold are expected to be stable and perform good, there are not much expectations
for 3 month gold, till the pandemic continues.

References
EconoTimes (2020) America’s Roundup: Dollar retains advantage amid coronavirus crisis,
Wall Street slides, Gold surges 2%, Oil edges higher, U.S. gasoline slumps over 30% on
sinking demand-March 24th,2020 [online] Available from:
https://www.econotimes.com/Americas-Roundup-Dollar-retains-advantage-amid-
coronavirus-crisis-Wall-Street-slides-Gold-surges-2-Oil-edges-higher-US-gasoline-slumps-
over-30-on-sinking-demand-March-24th2020-1577998 [Accessed on: 28 March 2020].
Global Economic Dynamics (2020) What does the coronavirus outbreak mean for the global
economy? [online] Available from: https://ged-project.de/allgemein-en/coronavirus-global-
economy/?cn-reloaded=1 [Accessed on: 28 March 2020].