Changes in exchange rates that deviate from the PPP, but at the same time also influence the path of a country's inflation. When we have high inflation, our dollar causes everything to become more expensive, which could actually cause businesses to collapse and the need for jobs to become more severe. PPP problems enter exchange rate politics when a country tries to gain advantages with a cautious policy of perhaps moving the exchange rate away from the PPP. A real depreciation serves to gain competitiveness and shift employment towards the depreciating country. In Europe, unemployment rates are lower because their dollar value on the exchange rate exceeds ours, creating more businesses which in turn equals more jobs. In the 1930s people called this "beggar, thy neighbor" policy, and during World War II it became "export-led growth." A policy of appreciation by difference serves to reduce inflationary pressure because the rate of increase in the prices of traded goods is pushed far below the rate of inflation. These economic effects of purchasing power disparities are not that difficult to achieve, for example: short-term easy money serves to deflect the exchange rate and this creates jobs. Conversely, however, an economy that could be heavily indexed by the influence of the exchange rate in an attempt to create employment equal to the easy money would probably be truly frustrating as the depreciation of the exchange rate would trigger wage and price inflation. Deviations from the PPP have also been used as disinflation. Deliberate fixing of the exchange rate or pre-announced depreciation rates below prevailing inflation rates have been adopted in various countries to curb inflation. The experience has been almost unambiguous... half the paper... mental". Explicit target zones have been proposed as a means of keeping the benefits of flexible rates within limits that maintain an approximate PPP. Expansionary monetary policy can only be effective if wages and prices are not fully flexible and it will be more effective the more flexible the exchange rate is. The essential channel is the real depreciation of the exchange rate which serves to create employment, at least for a while be effective only if monetary wages and prices do not respond. to determine the resulting magnitude and persistence of political effects. Disparities in PPP are relevant to the choice of exchange rate between