International parity conditions approach Do international parity conditions hold in the real world? PPP does not hold precisely in the real world: --Arbitrage only works for tradable goods. --Transportation costs. --Barriers to trade. 袋 PPP tends not to be accurate in predicting short-term changes in exchange rates,but gets empirical support at longer horizons.International parity conditions approach Do international parity conditions hold in the real world? PPP does not hold precisely in the real world: --Arbitrage only works for tradable goods. --Transportation costs. --Barriers to trade. PPP tends not to be accurate in predicting short-term changes in exchange rates, but gets empirical support at longer horizons