This paper replies to Ahking’s (1990) re-examination of Taylor and McMahon’s (1988) analysis of long-run purchasing power parity in the 1920s. We demonstrate that Ahking’s conclusions are only partially correct and reestablish our conclusion that, a form of long-run purchasing-power parity...

Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public infrastructure spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with...