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Deviations of Exchange Rates From Purchasing Power Parity

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Author Info

  • Ronald MacDonald
  • Tamim Bayoumi

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 appear 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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 98/69.

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Length: 17
Date of creation: 01 May 1998
Date of revision:
Handle: RePEc:imf:imfwpa:98/69

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Cited by:
  1. António Portugal Duarte, 2005. "Purchasing power parity: an empirical study of three EMU countries," International Finance 0505010, EconWPA.

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