This paper employs a new methodology for measuring the contribution of growth and interest rate differentials to the half-life of deviations from Purchasing Power Parity (PPP). Our method is based on directly comparing the impulse response function of a VAR model, where the real exchange rate is...

In this paper we analyse the relationship between long bond yields and inflation in an economy subject to three types of stochastic disturbances: real shocks, nominal shocks, and shocks to term premia. Statistical inference is based on the impulse-response function of a Structural VAR model,...