For the small open economy of Botswana the PPP theory is validated in both the absolute and relative version for the Pula-Dollar exchange rate during the sample period 1992 third quarter to 2002 fourth quarter. The Pula-Dollar exchange rate is determined by the long-term trends in Botswana’s...

This paper examines mean reversion in real effective exchange rates in six leading Latin American economies during the XXth century using a new data set. A unit-root approach is complemented by an error-correction model including key fundamentals such as terms of trade, trade openness and...

The half-life of deviations from purchasing power parity (PPP) plays a central role in the ongoing debate about the ability of macroeconomic models to account for the time series behaviour of the real exchange rate. The main contribution of this paper is a general framework in which alternative...

We propose that analysis of purchasing power parity (PPP) and the law of one price (LOOP) should explicitly take into account the possibility of ‘commodity points’ – thresholds delineating a region of no central tendency among relative prices, possibly due to lack of perfect arbitrage in...

Originally propounded by the 16th-century scholars of the University of Salamanca, the concept of purchasing power parity (PPP) was revived in the interwar period in the context of the debate concerning the appropriate level at which to re-establish international exchange rate parities. Broadly...

We fit nonlinearly mean-reverting models to real dollar exchange rates over the post-Bretton Woods period, consistent with a theoretical literature on transaction costs in international arbitrage. The half lives of real exchange rate shocks, calculated through Monte Carlo integration, imply...

In this Paper we assess the progress made by the profession in understanding whether and how exchange rate intervention works. To this end, we review the theory and evidence on official intervention, concentrating primarily on work published within the last decade or so. Our reading of the...