search query: @indexterm PURCHASING POWER / total: 65
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| Author: | Abuaf, N. Jorion, P. |
| Title: | Purchasing power parity in the long run |
| Journal: | Journal of Finance
1990 : MAR, VOL. 45:1, p. 157-174 |
| Index terms: | PURCHASING POWER EXCHANGE RATES ECONOMETRIC MODELS REGRESSION ANALYSIS |
| Language: | eng |
| Abstract: | The evidence on Purchasing Power Parity (PPP) in the long run is re-examined. Previous studies have been unable to reject the hypothesis that the real exchange rate follows a random walk. If true, this implies that PPP does not hold. In contrast, evidence is presented which casts serious doubts on the random walk hypothesis. The results follow from more powerful estimation techniques, applied in a multilateral framework. Deviations from PPP, while substantial in the short run, appear to take about three years to be reduced in half. |
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