Arghyrou, Michael; gregoriou, andros; Pourpourides, … - Economics Section, Cardiff Business School - 2009
Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. We test this hypothesis on aggregate data from the G7-area. We find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power Parity.