Essentially everything in a country's economy and its
political system determines the value of its money. The economy and the politics of the
country work together to determine the price level that prevails in the economy and
this, in turn, determines the purchasing power of the
currency.
In order for the currency to have strong
purchasing power, a country must be economically productive and politically stable. It
must be economically productive so that economic growth can occur and the price level
can stay low. It must be politically stable so that people are confident enough in the
government and economy that they will be willing to save and invest. These things also
drive the price level down.
Thus, there is no one factor
that determines the purchasing power of a currency. It is impacted by everything that
happens in an economy and government.
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