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Real Disturbances, Relative Prices, and Purchasing Power Parity

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  • Selahattin Dibooglu

    (Southern Illinois University at Carbondale)

Abstract

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.

Suggested Citation

  • Selahattin Dibooglu, 1995. "Real Disturbances, Relative Prices, and Purchasing Power Parity," International Finance 9502002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:9502002
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    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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