The purchasing power parity puzzle relates to the adjustment of real exchange rates. Real exchange rates are extremely … is extremely large -- 2.5 to 5 years. This half-life seems too large to be explained by the slow adjustment of nominal …

rate adjustment based on data from dual exchange rates in developing countries. Specifically, we analyze whether the more … flexible parallel market rate produces faster real exchange rate adjustment than the less flexible official rate does. Half …-life estimates of adjustment speeds are obtained from fractional time series analysis. We find no systematic evidence that greater …

The conventional view, as expounded by sticky-price models, is that price adjustment determines the PPP reversion rate …. This study examines the mechanism by which PPP deviations are corrected. Nominal exchange rate adjustment, not price … adjustment, is shown to be the key engine governing the speed of PPP convergence. Moreover, nominal exchange rates are found to …