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Disaggregate Real Exchange Rate Behaviour

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Author Info
Giorgio Fazio
Peter McAdam
Ronald MacDonald ()

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Abstract

In this paper, we re-examine the “PPP Puzzle†using sectoral disaggregated data. Specifically, we first analyse the mean reversion speeds of real exchange rates for a number of different sectors in 11 industrial economies and then focus on relating these rates to variables identified in the literature as key determinants of CPI-based real exchange rates, namely: the trade balance, productivity and the mark up. In particular, we seek to understand to what extent the relationships existing at the aggregate level are borne out at the disaggregate level. We believe that this analysis can help shed light on the PPP puzzle. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11079-007-9055-3
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Publisher Info
Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 4 (September)
Pages: 389-404
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Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:389-404

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Web page: http://www.springerlink.com/link.asp?id=100323

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Related research
Keywords: Real exchange rates Sectoral prices Panel data methods F31 F41 C33

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External wealth, the trade balance, and the real exchange rate," European Economic Review, Elsevier, vol. 46(6), pages 1049-1071, June. [Downloadable!] (restricted)
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  2. Parsley, David & Wei, Shang-Jin, 2004. "A Prism into the PPP Puzzles: The Micro-Foundations of Big Mac Real Exchange Rates," CEPR Discussion Papers 4486, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
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  4. MacDonald, Ronald & Ricci, Luca Antonio, 2007. "Real exchange rates, imperfect substitutability, and imperfect competition," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 639-664, December. [Downloadable!] (restricted)
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This page was last updated on 2008-7-2.

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