The Purchasing Power Parity Puzzle: An Update

Weshah Razzak

Journal of Economics and Econometrics, 2018, vol. 61, issue 2, 77-104

Abstract: We show that the Purchasing Power Parity (PPP) puzzle, whereby the half-life of the shock to the real exchange rate is long and unjustifiable by monetary and financial shocks, is a result of specification and estimation issues. We provide an alternative specification for PPP and show that the half-life of the shock could be as short as 6.8 months and as long as 2 years, which is considerably shorter than what have been reported in the literature.

Keywords: PPP; unit root; half-life of shocks (search for similar items in EconPapers)
JEL-codes: C13 C18 F31 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ideas.repec.org/a/eei/journl/v61y2018i2p77-104.html
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Purchasing Power Parity Puzzle: An Update (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eei:journl:v:61:y:2018:i:2:p:77-104

Access Statistics for this article

More articles in Journal of Economics and Econometrics from Economics and Econometrics Society Contact information at EDIRC.
Bibliographic data for series maintained by Julia van Hove ().