Sarno, Lucio and Taylor, Mark P., 1958- (2001) Purchasing power parity and the real exchange rate. Discussion Paper. London: Centre for Economic Policy Research (Great Britain). (Discussion paper (Centre for Economic Policy Research (Great Britain)).

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Abstract

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 also means 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.

Item Type:	Working or Discussion Paper (Discussion Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Purchasing power parity, Foreign exchange rates -- Econometric models, Nonlinear theories, Foreign exchange
Series Name:	Discussion paper (Centre for Economic Policy Research (Great Britain))
Publisher:	Centre for Economic Policy Research (Great Britain)
Place of Publication:	London
Date:	August 2001
Number:	No.291
Number of Pages:	40
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
URI:	http://wrap.warwick.ac.uk/id/eprint/1685

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