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Purchasing power parity and the real exchange rate
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Sarno, Lucio and Taylor, Mark P. (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)) (No.291).
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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) | ||||
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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 | ||||
Official Date: | August 2001 | ||||
Dates: |
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Number: | No.291 | ||||
Number of Pages: | 40 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) |
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