Search Results
Conference Paper
Purchasing power parity as a monetary standard
Journal Article
Burger survey provides taste of international economics
An annual survey on the price of a hamburger in countries around the globe provides a surprisingly meaty lesson about relative currency valuations.
Working Paper
What determines European real exchange rates?
We study a newly constructed panel data set of relative prices of a large number of consumer goods among 31 European countries. We find that there is a substantial and nondiminishing deviation from PPP at all levels of aggregation, even among euro zone members. However, real exchange rates are very closely tied to relative GDP per capita within Europe, both across countries and over time. This relationship is highly robust at all levels of aggregation. We construct a simple two-sector endowment economy model of real exchange rate determination. Simulating the model using the historical ...
Working Paper
Quantifying the half-life of deviations from PPP: The role of economic priors
The half-life of deviations from purchasing power parity (PPP) plays a central role in the ongoing debate about the ability of macroeconomic models to account for the time series behavior of the real exchange rate. The main contribution of this paper is a general framework in which alternative priors for the half-life of deviations from PPP can be examined. We show how to incorporate formally the prior views of economists about the half-life. In our empirical analysis we provide two examples of such priors. One example is a consensus prior consistent with widely held views among economists ...
Journal Article
The growing significance of purchasing power parity
The principle of purchasing power parity is central to the theoretical underpinnings of the analysis of many trade issues, but up until recently, there was little evidence that PPP held in the long run. Current research has changed that. The key to finding the evidence was realizing how to test for a long-run effect given the fact that exchange rates adjust to their long-run levels in a nonlinear way.
Conference Paper
Risk, inflation and exchange rates
Working Paper
Deviations from purchasing power parity: causes and welfare costs
We explore deviations from short-run purchasing power parity across European cities, attempting to move beyond a "first-generation" of papers that document very large border effects. We document two very distinct types of border effects embedded in relative prices. The first is a "real barriers effect," caused by various barriers to market integration. The second is a sticky-consumer-price cum volatile exchange-rate effect. Both are shown to be important empirically, the second type especially so. We argue that the two effects are very different from each other. For the first type of ...
Journal Article
Understanding trends in foreign exchange rates
Journal Article
International pricing in new open-economy models
Journal Article
International output comparisons