search query: @indexterm PURCHASING POWER / total: 65
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| Author: | Dutton, M. Strauss, J. |
| Title: | Cointegration tests of purchasing power parity: the impact of non-traded goods |
| Journal: | Journal of International Money and Finance
1997 : JUN, VOL. 16:3, p. 433-444 |
| Index terms: | FINANCE COINTEGRATION PURCHASING POWER |
| Language: | eng |
| Abstract: | This paper explores the relationship between non-traded goods relative prices and the real exchange rate. The authors apply the Johansen maximum likelihood procedure to two different data sets of traded and non-traded prices. First, the authors develop a model which highlights the importance of non-traded relative price movements in causing deviations in the real exchange rate away from PPP. The authors find a strong association. A rise (fall) in the domestic relative price of non-traded goods is associated with an appreciation (depreciation) in the real exchange rate while the opposite is true for the foreign relative price. |
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