6533b825fe1ef96bd12829cf

RESEARCH PRODUCT

Disaggregate Real Exchange Rate Behaviour

Ronald MacdonaldGiorgio FazioPeter Mcadam

subject

MacroeconomicsEconomics and EconometricsExchange rateMean reversionEconomicsBalance of tradejel:F31Aggregate leveljel:F41jel:C33Real Exchange Rates Sectoral Prices Panel Data MethodsProductivity

description

In this paper, we re-examine the “PPP Puzzle” using sectoral disaggregated data. Specifically, we first analyse the mean reversion speeds of real exchange rates for a number of different sectors in eleven industrial economies and then focus on relating these rates to variables identified in the literature as key determinants of CPI-based real exchange rates, namely: the trade balance, productivity and the mark up. In particular, we seek to understand to what extent the relationships existing at the aggregate level are borne out at the disaggregate level. We believe that this analysis can help shed light on the PPP puzzle.

yearjournalcountryeditionlanguage
2007-06-08
http://www.gla.ac.uk/media/media_33619_en.pdf