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| Author: | Lothian, J. R. |
| Title: | Multi-country evidence on the behavior of purchasing power parity under the current float |
| Journal: | Journal of International Money and Finance
1997 : FEB, VOL. 16:1, p. 19-35 |
| Index terms: | PURCHASING POWER EXCHANGE RATES FLOATING RATES |
| Language: | eng |
| Abstract: | In late 1980 purchasing power parity (PPP) and exchange-rate models that relied on it stood in near total discredit. Since then evidence has been more favourable to PPP but the bulk of that evidence has come from examination of long historical data sets. This study suggests that the conclusions of such studies are applicable to the current float. The stylized facts of the floating rate period considered most inimical to PPP were the high volatility of real exchange rates and positive correlation between real and nominal exchange rates observed in month-to-month and even year-to-year data. Purchasing power parity turns out to have retained a good deal of empirical usefulness. |
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