Real disturbances, relative prices and purchasing power parity
This paper tests a modified version of Purchasing Power Parity, which hypothesizes that real shocks that alter equilibrium relative prices between tradables and non-tradables are responsible for the deviations from purchasing power parity. Using cointegration/error-correction methods and quarterly data from the post Bretton Woods period, we find supportive evidence that productivity, government spending, and real world oil price might account for deviations from purchasing power parity.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Huizinga, John, 1987. "An empirical investigation of the long-run behavior of real exchange rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 149-214, January.
- Masson, Paul & Blundell-Wignall, Adrian, 1985. "Fiscal policy and the exchange rate in the big seven : Transmission of U.S. government spending shocks," European Economic Review, Elsevier, vol. 28(1-2), pages 11-42.
- Baillie, Richard T. & Pecchenino, Rowena A., 1991.
"The search for equilibrium relationships in international finance: the case of the monetary model,"
Journal of International Money and Finance,
Elsevier, vol. 10(4), pages 582-593, December.
- Baillie, R.T. & Pecchenino, R.A., 1991. "The Search for Equilibrium Relationships in International Finance : The Case of the Monetary Model," Papers 9003, Michigan State - Econometrics and Economic Theory.
- Baillie, Richard T. & Selover, David D., 1987. "Cointegration and models of exchange rate determination," International Journal of Forecasting, Elsevier, vol. 3(1), pages 43-51.
- Urbain, Jean-Pierre, 1992.
"On Weak Exogeneity in Error Correction Models,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 54(2), pages 187-207, May.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Abuaf, Niso & Jorion, Philippe, 1990. " Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 45(1), pages 157-174, March.
- Benjamin M. Friedman, 1992. "Learning From the Reagan Deficits," NBER Working Papers 4022, National Bureau of Economic Research, Inc.
- Corbae, Dean & Ouliaris, Sam, 1988. "Cointegration and Tests of Purchasing Power Parity," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 508-511, August.
- Cheung, Yin-Wong & Lai, Kon S., 1993. "Long-run purchasing power parity during the recent float," Journal of International Economics, Elsevier, vol. 34(1-2), pages 181-192, February.
- R. Dornbusch & S. Fischer & P. A. Samuelson, 1976.
"Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods,"
178, Massachusetts Institute of Technology (MIT), Department of Economics.
- Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
- Jun-ichi Itaya & Heinrich Ursprung, 2008. "Price and Death," CESifo Working Paper Series 2213, CESifo Group Munich.
- Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
- Friedman, Benjamin M, 1992. "Learning from the Reagan Deficits," American Economic Review, American Economic Association, vol. 82(2), pages 299-304, May.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Lastrapes, William D, 1992. "Sources of Fluctuations in Real and Nominal Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 530-539, August.
- Enders, Walter, 1988. "ARIMA and Cointegration Tests of PPP under Fixed and Flexible Exchange Rate Regimes," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 504-508, August.
- Mark, Nelson C., 1990. "Real and nominal exchange rates in the long run: An empirical investigation," Journal of International Economics, Elsevier, vol. 28(1-2), pages 115-136, February.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
- Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
- Adrian W. Throop, 1993. "A generalized uncovered interest parity model of exchange rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
- Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-470, October.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:18:y:1996:i:1:p:69-87. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.