Purchasing Power Parity for Traded Andnon-traded Goods: a Structural Error Correction Model Approach PDF Download
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Author: Jaebeom Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
Author: Jaebeom Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
Author: Jaebeom Kim
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 46
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Book Description
Author: Robert C. Feenstra
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 56
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Book Description
In this paper we develop and test two hypotheses about purchasing power parity (PPP) derived from the pricing behavior of profit- maximizing, exporting firms. The first is that changes in the price of traded goods relative to domestic substitutes, due to partial pass- through of exchange rates, will affect the PPP relation. The second is that PPP should hold on forward rather than spot exchange rates, due to hedging by firms. Using quarterly data for the United States, Canada, France, Germany, Japan and the United Kingdom, we find considerable support for the first but not the second hypothesis.
Author: Jaebeom Kim
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 48
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Author: Luca Antonio Ricci
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 40
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Book Description
This paper theoretically derives and empirically tests the implications of a new trade theory framework for the systematic movements in the real exchange rate. It focuses on the effect of imperfect substitutability of tradables and on the importance of competitiveness, for which we construct an original proxy. Using a panel dynamic OLS estimation of nine bilateral US dollar real exchange rates, we derive long-run coefficients for relative productivity and competitiveness in the tradable and non-tradable sectors, controlling for standard macroeconomic variables. The implications of imperfect substitutability of tradables fit the data better than the standard neoclassical assumption of price equalization. Our new measure of competitiveness is statistically significant in explaining deviations from PPP.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
The use of purchasing power parity as a basis of fixing exchange rates among industrial countries, as proposed by McKinnon, is discussed and contrasted with alternative interpretations of the PPP doctrine. Major policy implications of such a regime are emphasized. Furthermore, a new technique for estimating PPP exchange rates which makes use of price pressure exerted by exchange deviation is introduced. This method is capable of solving the “base-year” problem more satisfactorily than the traditional Cassel-Keynes methodology. Estimated yen/dollar and mark/dollar PPP exchange rates are close to estimates derived using other methods.
Author:
Publisher:
ISBN:
Category : Economic development
Languages : en
Pages : 44
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Book Description
Author: Mark P. Taylor
Publisher: Routledge
ISBN: 1317988191
Category : Business & Economics
Languages : en
Pages : 434
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Book Description
The term Purchasing Power Parity may date from the early twentieth century, when it was coined by the Swedish economist Gustav Cassel, but the underlying concept had been enjoying varying degrees of success since its development in sixteenth century Spain. Even towards the end of the twentieth century, and especially since the breakdown of the Bretton Woods system of fixed exchange rates, PPP and the stability of real exchange rates continued to be the subject of academic debate. This volume brings together essays covering aspects of current thinking on Purchasing Power Parity, from the various ways in which to test for its existence, to its appearance in different economies around the world, to examinations of the explanations given when PPP does not appear to hold This book was published as a special issue of Applied Financial Economics. The academic editor of this journal is Mark P. Taylor.
Author: Frederique Bec
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The goal of this paper is to disentangle the respective contributions of the nominal exchange rate and the price differential to the adjustment towards the Purchasing Power Parity relation. To this end, we estimate a threshold vector equilibrium correction model, whose dynamics is consistent with the PPP in presence of trading costs. European data support the relevance of this model for Belgium, France and Italy, but this is not the case for the G7 data against the US Dollar. Furthermore, the adjustment in European countries seems to have been achieved only through nominal exchange rate changes.
Author: Mr. Haroon Mumtaz
Publisher: International Monetary Fund
ISBN: 1451895534
Category : Business & Economics
Languages : en
Pages : 43
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Book Description
We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff''s "consensus view" of three to five years. We show that corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the PPP puzzle.
