The purchasing power parity puzzle: An update

We show that the Purchasing Power Parity (PPP) puzzle, whereby the half-life of the shock to the real exchange rate is long and unjustifiable by monetary and financial shocks, is a result of specification and estimation issues. We provide an alternative specification for PPP and show that the half-life of the shock could be as short as 6.8 months and as long as 2 years, which is considerably shorter than what have been reported in the literature.

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Year of publication:	2018
Authors:	Razzak, Weshah A.
Publisher:	Brussels : Economics and Econometrics Research Institute (EERI)
Subject:	PPP \| unit root \| half-life of shocks

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Series:	EERI Research Paper Series ; 05/2018
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	1026678080 [GVK] hdl:10419/213538 [Handle]
Classification:	C13 - Estimation ; c18 ; F31 - Foreign Exchange
Source:	EconStor

Persistent link: https://www.econbiz.de/10012157203