Imbs, Jean; Mumtaz, Haroon; Ravn, Morten O; Rey, Hélène - C.E.P.R. Discussion Papers - 2003
We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When...