This paper tests for purchasing power parity (PPP) using real effective exchange rate data for 90 developed and developing countries in the post-Bretton Woods period. Support for PPP is found, since the majority of countries experience finite deviations of real exchange rates from parity. The...

This paper tests for purchasing power parity (PPP) using real effective exchange rate data for 90 developed and developing countries in the post-Bretton Woods period. Support for PPP is found, since the majority of countries experience finite deviations of real exchange rates from parity. The...

Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity (PPP) of between three to five years (Rogoff, 1996). However, conventional least-squares-based estimates of half-lives are...

Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity (PPP) of between three to five years (Rogoff, 1996). However, conventional least-squares-based estimates of half-lives are...

Since 1999, IMF staff have been tracking several early warning system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private...

This paper considers the effect of exchange and capital controls on trade in the gravity-equation framework, in which bilateral exports depend on the distance between countries, the countries' size and wealth, tariff barriers, and exchange and capital controls. The extent of exchange and capital...

This paper analyzes the effects of exchange rate volatility on bilateral trade flows. Through use of a gravity model and panel data from western Europe, exchange rate uncertainty is found to have a negative effect on international trade. The results seem to be robust with respect to the...

There is surprisingly little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel-data sample of 16 developing countries. The paper finds that the...

Which model best explains the 1991 currency crisis in India? Did real overvaluation contribute to the crisis? This paper seeks the answers through error correction models and by constructing the equilibrium real exchange rate using a technique developed by Gonzalo and Granger (1995). The...

We assess the progress made by the profession in understanding real exchange rate behavior through a selective and critical, but nonetheless expository, review of the literature. Our reading of the literature leads us to the main conclusions that purchasing power parity might be viewed as a...