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Purchasing power parity and the theory of general relativity: The first tests
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UNSPECIFIED (2005) Purchasing power parity and the theory of general relativity: The first tests. In: 8th International Conference on Macroeconomic Analysis and International Finance, Univ Crete, Rethymno, GREECE, MAY 27-29, 2004. Published in: JOURNAL OF INTERNATIONAL MONEY AND FINANCE, 24 (2). pp. 293-316. doi:10.1016/j.jimonfin.2004.12.008 ISSN 0261-5606.
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Official URL: http://dx.doi.org/10.1016/j.jimonfin.2004.12.008
Abstract
We implement novel tests of general relative purchasing power parity (PPP), defined as a long-run unit elasticity of the nominal exchange rate with respect to relative national prices, allowing for potentially permanent real exchange rate shocks. The finite-sample properties of the estimators used are analyzed through Monte Carlo analysis, allowing for country heterogeneity, cross-sectional dependence and non-stationary disturbances. Application to panel data sets of industrialized and developing economies reveals that inflation differentials are on average reflected one-for-one in long-run nominal exchange rate depreciation-i.e. that general relative PPP holds. (c) 2004 Published by Elsevier Ltd.
Item Type: | Conference Item (UNSPECIFIED) | ||||
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Subjects: | H Social Sciences > HG Finance | ||||
Journal or Publication Title: | JOURNAL OF INTERNATIONAL MONEY AND FINANCE | ||||
Publisher: | ELSEVIER SCI LTD | ||||
ISSN: | 0261-5606 | ||||
Official Date: | March 2005 | ||||
Dates: |
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Volume: | 24 | ||||
Number: | 2 | ||||
Number of Pages: | 24 | ||||
Page Range: | pp. 293-316 | ||||
DOI: | 10.1016/j.jimonfin.2004.12.008 | ||||
Publication Status: | Published | ||||
Title of Event: | 8th International Conference on Macroeconomic Analysis and International Finance | ||||
Location of Event: | Univ Crete, Rethymno, GREECE | ||||
Date(s) of Event: | MAY 27-29, 2004 |
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