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Estimating Yen/Dollar and Mark/Dollar Purchasing Power Parities

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  • Kenichi Ohno

    (International Monetary Fund)

Abstract

A new technique for estimating purchasing power parity (PPP) exchange rates that makes use of price pressure exerted by exchange rate deviation is presented. The methodology consists of two equations for relative prices and relative costs, which are derived from a structural model, and offers a more satisfactory solution to the "base-year" problem than existing methods. The yen/dollar and mark/dollar PPP exchange rates are estimated and compared with those derived from other approaches. The closeness of these estimates shows that PPP estimation, although not a trivial exercise, can be performed with scientific accuracy.

Suggested Citation

  • Kenichi Ohno, 1990. "Estimating Yen/Dollar and Mark/Dollar Purchasing Power Parities," IMF Staff Papers, Palgrave Macmillan, vol. 37(3), pages 700-725, September.
    • Handle: RePEc:pal:imfstp:v:37:y:1990:i:3:p:700-725
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    Cited by:

    1. Chou, W. L. & Shih, Y. C., 1998. "The Equilibrium Exchange Rate of the Chinese Renminbi," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 165-174, March.
    2. Zhibai Zhang & Xinyue Zou, 2013. "The Ratio Model and its Application: A Revisit," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(6), pages 1-4.
    3. Jinzhao Chen, 2009. "Beyond Cheap Talks: Assessing the Undervaluation of the Chinese Currency Between 1994 and 2007," Economie Internationale, CEPII research center, issue 119, pages 47-82.

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