search query: @indexterm exchange rates / total: 1242
reference: 33 / 1242
| Author: | Parsley, D.C. Wei, S-J. |
| Title: | A prism into the PPP puzzles: the micro-foundations of Big Mac real exchange rates |
| Journal: | Economic Journal
2007 : OCT, VOL. 117:523, p. 1336-1356 |
| Index terms: | purchasing power parity exchange rates price indices international |
| Language: | eng |
| Abstract: | In this paper, as a unique prism to study real exchange rates (RER/RERs), Big Mac (here as: B-M.) prices are matched with prices of its ingredients. The advantages of this approach are as follows: 1. The levels of the B-M. RER can be measured meaningfully, 2. As the exact composition of a B-M. is known, the contributions of its tradable and non-tradable components can be estimated relatively precisely, 3. The dynamics of the RER can be studied in a setting free of several biases inherent in CPI-based RERs, and 4. A large cross-country dimension allows to overturn the Engel result on what drives RERs. In most economies, the exchange rate is the single most important relative price. |
SCIMA