Deviations of Exchange Rates from Purchasing Power Parity: A Story Featuring Two Monetary Unions

Tamim Bayoumi and Ronald MacDonald

No 1932, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group are mean-reverting, the intra-national rates are not. This is consistent with the view that while monetary shocks may be mean-reverting over the medium-term, underlying real factors do generate long-term trends in real exchange rates.

Keywords: Exchange Rates; stationarity (search for similar items in EconPapers)
JEL-codes: C12 C23 F31 (search for similar items in EconPapers)
Date: 1998-07
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Deviations of Exchange Rates from Purchasing Power Parity: A Story Featuring Two Monetary Unions (1999)
Working Paper: Deviations of Exchange Rates from Purchasing Power Parity: A Story Featuring Two Monetary Unions (1998)
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