On the purchasing power parity puzzle

• 成果类型: Article
• 署名作者: Cheung, YW; Lai, KS
• 署名单位: California State University System; California State University Los Angeles; University of California System; University of California Santa Cruz
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(99)00056-2
• 发表日期: 2000
• 页码: 321-330
• 关键词: Real exchange rate; half-life persistence; shock amplification; non-monotonic mean reversion

摘要

A puzzle concerning purchasing power parity is examined: Although the immense exchange rate volatility suggests a likely major role of nominal shocks under sticky prices, the observed half-life persistence of the real exchange rate seems excessively high to be rationalized by price stickiness, This study analyzes carefully the adjustment dynamics of real exchange rates through impulse response analysis. Half-life estimates are found to have substantial imprecision. Moreover, the dynamic response pattern suggests that the shock response is initially amplified before dissipating and that such non-monotonic dynamics can contribute to more than one-third of the observed persistence of real exchange rates. (C) 2000 Elsevier Science B.V. All rights reserved.