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Internal Relative Price Stationarity in Long-Run Purchasing Power Parity

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  • Breuer, Janice Boucher
  • Lippert, Alston Flynn

Abstract

This study demonstrates that the joint relationship among domestic traded-goods prices, domestic nontraded-goods prices, foreign traded-goods prices, and foreign nontraded-goods prices is important to understanding rejections or confirmations of long-run PPP. This joint relationship is defined as the "cross-country internal relative price structure." For nine of the ten pairs of countries studied, the cross-country internal relative price structure is found to be stationary; thus, factors other than the influence of nontraded-goods prices must be responsible for the rejections of long-run PPP. Copyright 1997 by Blackwell Publishing Ltd.

Suggested Citation

  • Breuer, Janice Boucher & Lippert, Alston Flynn, 1997. "Internal Relative Price Stationarity in Long-Run Purchasing Power Parity," Review of International Economics, Wiley Blackwell, vol. 5(2), pages 195-203, May.
  • Handle: RePEc:bla:reviec:v:5:y:1997:i:2:p:195-203
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    References listed on IDEAS

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    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, pages 84-103.
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    12. Backus, David K. & Kehoe, Patrick J. & Kydland, Finn E., "undated". "Backus_Kehoe_Kydland," Instructional Stata datasets for econometrics backus, Boston College Department of Economics.
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    19. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, pages 84-103.
    20. Michael R. Pakko, 1998. "Characterizing Cross-Country Consumption Correlations," The Review of Economics and Statistics, MIT Press, pages 169-174.
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    Cited by:

    1. Taylor Mark P. & Sarno Lucio, 2001. "Real Exchange Rate Dynamics in Transition Economies: A Nonlinear Analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, pages 1-26.
    2. David Parsley & Helen Popper, 2010. "Understanding Real Exchange Rate Movements With Trade In Intermediate Products," Pacific Economic Review, Wiley Blackwell, pages 171-188.
    3. Reza Siregar, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81, April.

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