Dissecting the PPP puzzle: the unconventional roles of nominal exchange rate and price adjustments

• 成果类型: Article
• 署名作者: Cheung, YW; Lai, KS; Bergman, M
• 署名单位: California State University System; California State University Los Angeles; University of California System; University of California Santa Cruz; Lund University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(03)00076-X
• 发表日期: 2004
• 页码: 135-150
• 关键词: purchasing power parity; price adjustment speed; half-life; generalized impulse responses

摘要

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 converge much more slowly than prices. With the reversion being driven primarily by nominal exchange rates, real exchange rates also revert at a slower rate than prices, as identified by the PPP puzzle [J. Econ. Lit. 34 (1996) 647]. (C) 2003 Elsevier B.V. All rights reserved.