Purchasing Power Parity and the Real Exchange Rate
Mark P. Taylor
University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR)
City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. 2913
We assess the progress made by the profession in understanding real exchange rate behaviour, through a selective and critical but nonetheless expository review of the literature. Our reading of the literature leads us to the main conclusions that purchasing power parity might be viewed as a valid long-run international parity condition when applied to bilateral exchange rates among major industrialized countries and that mean reversion in real exchange rates displays significant non-linearities. Further work investigating the effects of real shocks on the long-run equilibrium level also seems warranted.
Number of Pages in PDF File: 40
Keywords: Foreign exchange, purchasing power parity, real exchange rate
JEL Classification: F31working papers series
Date posted: August 22, 2001
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.969 seconds