PPP Strikes Back : Aggregation and the Real Exchange Rate /

We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity...

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Bibliografische gegevens
Hoofdauteur: Mumtaz, Haroon
Andere auteurs: Imbs, Jean, Ravn, Morten, Rey, Helene
Formaat: Tijdschrift
Taal:English
Gepubliceerd in: Washington, D.C. : International Monetary Fund, 2003.
Reeks:IMF Working Papers; Working Paper ; No. 2003/068
Online toegang:Full text available on IMF
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245 1 0 |a PPP Strikes Back :   |b Aggregation and the Real Exchange Rate /  |c Haroon Mumtaz, Jean Imbs, Morten Ravn, Helene Rey. 
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300 |a 1 online resource (42 pages) 
490 1 |a IMF Working Papers 
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500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
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520 3 |a We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff's "consensus view" of three to five years. We show that corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the PPP puzzle. 
538 |a Mode of access: Internet 
700 1 |a Imbs, Jean. 
700 1 |a Ravn, Morten. 
700 1 |a Rey, Helene. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2003/068 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2003/068/001.2003.issue-068-en.xml  |z IMF e-Library