Understanding Exchange Rate Models

During a recent discussion on exchange rate models, a group of finance students explored the different frameworks that explain how currency values are determined relative to each other. They focused on two prominent models: the Purchasing Power Parity (PPP) model and the Interest Rate Parity (IRP) model.

The PPP model suggests that exchange rates should adjust to equalize the purchasing power of different currencies by taking into consideration the price levels in different countries. Conversely, the IRP model states that the difference in nominal interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Given this background, consider the following statement related to the prediction of exchange rates based on these models.