Intra-national, intra-continental, and intra-planetary PPP

Charles Engel, Michael K. Hendrickson and John Rogers

No 589, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper presents a general framework to address several issues that have arisen in recent work that investigates purchasing power parity (PPP) and other inter-regional relative price movements: (1) How can we model real exchange rate movements in a consistent manner, so that our model for the real exchange rate for country B relative to country C is commensurate with our models for country A/ country B and country A/ country C real exchange rates? For example, can things be modeled so that our tests do not depend on the \"base country\"? (2) How should we handle correlation across real exchange rates in panel tests of PPP? (3) Are speeds of adjustment toward PPP different for intra-national, cross-national and cross-continental real exchange rates? (4) Is the innovation variance different for intra-national, cross-national and cross-continental real exchange rates; and, if so, how does that influence how we model and test PPP?

Keywords: Purchasing power; Foreign exchange rates (search for similar items in EconPapers)
Date: 1997
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/1997/589/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/1997/589/ifdp589.pdf (application/pdf)

Related works:
Journal Article: Intranational, Intracontinental, and Intraplanetary PPP (1997)
Working Paper: Intra-National, Intra-Continental, and Intra-Planetary PPP (1997)
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:fip:fedgif:589

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier (ryan.d.wolfslayer@frb.gov).