Long-Run Purchasing Power Parity and the Dollar-Sterling Exchange Rate in the 1920s

25 Pages Posted: 15 Feb 2006

See all articles by Mark P. Taylor

Mark P. Taylor

Washington University in St. Louis - John M. Olin Business School; Centre for Economic Policy Research (CEPR); Brookings Institution

Date Written: December 1990

Abstract

This paper replies to Ahking`s (1990) re-examination of Taylor and McMahon`s (1988) analysis of long-run purchasing power parity in the 1920s. We demonstrate that Ahking`s conclusions are only partially correct and reestablish our conclusion that a form of long-run purchasing-power parity did in fact hold for dollar-sterling during this period. The new results are also employed to gauge the degree of overvaluation of sterling relative to the imposed prewar parity of $4.86 upon its return to gold and for 12 months afterwards.

JEL Classification: 044, 431, 432

Suggested Citation

Taylor, Mark P., Long-Run Purchasing Power Parity and the Dollar-Sterling Exchange Rate in the 1920s (December 1990). IMF Working Paper No. 90/118, Available at SSRN: https://ssrn.com/abstract=885152

Mark P. Taylor (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

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Centre for Economic Policy Research (CEPR)

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