This paper describes in detail the methodology currently used by the European Central Bank (ECB) to determine the nominal and real effective exchange rate indices of the euro. Building on the work of Buldorini et al. (2002), it shows how the ECB's techniques for calculating effective exchange...

The nominal effective exchange rate (EER) of a currency is an index of the tradeweighted average of its bilateral exchange rates vis-à-vis the currencies of selected trading partners, while the real EER is derived by adjusting the nominal index for relative prices or costs. The nominal EER...

We document the consequences of real exchange rate movements for the employment, hours, and hourly earnings of workers in manufacturing industries across individual states. Exchange rates have statistically significant wage and employment implications in these local labor markets. The importance...

One of the most important and recurrent concept in international macroeconomics is Purchasing Power Parity (PPP) hypothesis. PPP has been used as a theory of domestic price determination under fixed exchange rate regime and a theory of exchange rate determination under flexible exchange rate...

This paper examines the persistence of relative consumer price indices for 15 regions in Korea including 6 metropolitan cities and 9 provinces over the period of 1990-2016. In particular, we ask if relative regional price indices contain a common stochastic trend and find that they are not. We...

This paper tests the validity of Purchasing Power Parity (PPP) doctrine for Ghana using the conventional relative PPP equation. We conducted a univariate Augmented Dickey-Fuller unit root test on the model variables. Exchange rate and CPI data for Ghana and the USA were collected on annual basis...

This paper re-assesses the panel (unit root test) evidence for PPP on four monthly data sets. We discuss and illustrate that commonly-used first generation panel unit root tests are inappropriate for PPP analysis since they are constructed for cross-sectionally uncorrelated panels. Given that...

This paper consists of two parts. In the first part the sensitivity of PPP testing to the nature of the unit root tests is demonstrated. Three unit root tests are employed for fourteen real bilateral exchange rates. The first two, the augmented Dickey-Fuller test and the Phillips-Perron test are...

In this letter we model the deviation of the nominal exchange rate from the long run equilibrium level predicted by monetary fundamentals in a nonlinear framework consistent with the presence of transaction costs. We consider a novel approach that allows for the joint testing of nonlinearity and...

This paper provides evidence of long run purchasing power parity by performing a recently developed method to test for unit roots in the presence of structural breaks. Data consist of real exchange rate series for 20 countries including developed and developing economies. Structural breaks are...