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Real Exchange Rates under the Gold Standard

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  • Diebold, Francis X
  • Husted, Steven
  • Rush, Mark

Abstract

In this paper, the authors assert that most studies that have sought to determine the validity of purchasing power parity are flawed for two reasons. First, post-1973 data contain, by definition, only a very limited amount of the low-frequency information relevant for examination of long-run parity. Second, the dynamic econometric techniques used to model deviations from parity are typically quite crude with respect to admissible low-frequency dynamics. Both deficiencies are rectified in the present paper, with dramatic results. With a new longer data set, the authors study deviations from parity using long-memory models that allow for subtle forms of mean reversion. Copyright 1991 by University of Chicago Press.

Suggested Citation

  • Diebold, Francis X & Husted, Steven & Rush, Mark, 1991. "Real Exchange Rates under the Gold Standard," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1252-1271, December.
    • Handle: RePEc:ucp:jpolec:v:99:y:1991:i:6:p:1252-71
    DOI: 10.1086/261799
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